THE  PROBLEM  OF  A 
NATIONAL   BUDGET 


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INSTITUTE  FOR  GOVERNMENT  RESEARCH 


STUDIES  IN  ADMINISTRATION 

The  System  of  Financial  Administration  of  Great  Britain 

By  W.  F.  Willoughby,  W.  W.  WUloughby  and  S.  M.  Lindsay 

The  Budget 

By  Rene  Stourm 

T.  Plazinski,  Translator.  W.  F.  McCaleb,  Editor 

The  Canadian  Budgetary  System 
By  R  G.  Villard  and  W.  W.  Willoughby 

The  Problem  of  a  National  Budget 
By  W.  F.  Willoughby 

The  Movement  for  Budgetary  Reform  in  the  States 
By  W.  F.  Willoughby 

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By  Paul  Studensky  (In  press) 

The  System   of   Financial  Administration  of  the  United 
States  (In  preparation) 

PRINCIPLES  OF  ADMINISTRATION 

Principles  Governing  the  Retirement  of  Public  Employees 

By  Lewis  Meriaro 

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By  A.  G.  Thomas  (In  press) 

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MENT 

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D.  APPLETON  AND  COMPANY 
PUBLISHERS  NEW  YORK 


213  D 


STUDIES   IN  ADMINISTRATION 
INSTITUTE   FOR    GOVERNMENT    RESEARCH 

THE  PROBLEM 

OF  A 

NATIONAL  BUDGET 


BY 


WILLIAM  FRANKLIN  WILLOUGHBY 

DIRECTOR,  INSTITUTE  FOR  GOVERNMENT  RESEARCH 


D.  APPLETON  AND  COMPANY 

NEW  YORK  LONDON 

1918 


COPYRIGHT,  1918,  BY 
THE  INSTITUTE  FOR  GOVERNMENT  RESEARCH 


Printed  in  the  United  States  of  America 


THE  INSTITUTE  FOR  GOVERNMENT  RESEARCH 

Washington,  D.  C. 


The  Institute  for  Government  Research  is  an  association  of  citi- 
zens for  cooperating  with  public  officials  in  the  scientific  study  of 
government  with  a  view  to  promoting  efficiency  and  economy  in 
its  operations  and  advancing  the  science  of  administration.  It 
aims  to  bring  into  existence  such  information  and  materials  as  will 
aid  in  the  formation  of  public  opinion,  and  will  assist  officials,  par- 
ticularly those  of  the  national  government,  in  their  efforts  to  put  the 
public  administration  upon  a  more  efficient  basis. 

To  this  end,  it  seeks  by  the  thoroughgoing  study  and  examination 
of  the  best  administrative  practice,  public  and  private,  American 
and  foreign,  to  formulate  those  principles  which  lie  at  the  basis  of 
all  sound  administration,  and  to  determine  their  proper  adaptation 
to  the  specific  needs  of  our  public  administration. 

The  accomplishment  of  specific  reforms  the  Institute  recognizes 
to  be  the  task  of  those  who  are  charged  with  the  responsibility  of 
legislation  and  administration;  but  it  seeks  to  assist,  by  scientific 
study  and  research,  in  laying  a  solid  foundation  of  information  and 
experience  upon  which  such  reforms  may  be  successfully  built. 

While  some  of  the  Institute's  studies  find  application  only  in 
the  form  of  practical  cooperation  with  the  administrative  officers 
directly  concerned,  many  are  of  interest  to  other  administrators 
and  of  general  educational  value.  The  results  of  such  studies  the 
Institute  purposes  to  publish  in  such  form  as  will  insure  for  them 
the  widest  possible  utilization. 


Frank  J.  Goodnow, 

Chairman 


Edwin  A.  Alderman 
Robert  S.  Brookings 
James  F.  Curtis 
R.  FultoO  Cutting 
Raymond  B.  Fosdick 
Felix  Frankfurter 


Officers 

Robert  S.  Brookings, 

Vice-Chairman 

Frederick  Strauss, 
Treasurer 


Charles  P.  Neill, 

Secretary 


Trustees 

Frank  J.  Goodnow 
Jerome  D.  Greene 
Arthur  T.  Hadley 
Cesar  Lombardi 
A.  Lawrence  Lowell 
Samuel  Mather 
Charles  P.  Neill 

Director 
W.  F.  Willoughby. 


Charles  D.  Norton 
Martin  A.  Ryerson 
Frederick  Strauss 
Theodore  N.  Vail 
Charles  R.  Van  Hise 
Robert  S.  Woodward 


392395 


PREFACE 

The  following  papers  have  this  in  common.  Though  written 
at  different  times,  they  all  have  for  their  purpose  the  consider- 
ation of  that  most  fundamental  of  all  problems  of  our  public 
administration,  the  formulation  and  operation  of  an  efficient  sys- 
tem for  the  conduct  of  the  financial  operations  of  our  national 
government. 

The  Institute  for  Government  Research  has  from  its  establish- 
ment been  convinced  that  a  major  contribution  to  the  cause  of 
good  administration  could  be  made  by  subjecting  the  problem  of 
financial  administration  in  all  of  its  phases  to  an  intensive  study. 
The  first  three  volumes  of  the  series  of  "Studies  in  Administra- 
tion," published  by  it,  relate  to  this  subject.  In  the  first  is  given 
a  description  of  the  system  of  financial  administration  of  Great 
Britain,  the  country  which  has  the  oldest  and  best  developed  budg- 
etary system  in  the  world.  In  the  second  is  provided  a  transla- 
tion of  Rene  Stourm's  notable  work  on  the  Budget,  which  gives 
an  excellent  and  detailed  account  of  the  French  budgetary  sys- 
tem. In  the  third  is  given  a  study  of  the  Canadian  budgetary 
system,  prepared  along  the  lines  of  the  volume  on  the  British 
system.  This  last  volume  has  the  special  value  of  showing  how 
the  British  system  works  under  conditions  differing  from  those 
that  prevail  in  the  mother  country,  and  resembling  those  that 
exist  in  the  United  States.  As  there  shown,  the  failure  of  the 
Canadian  system  to  give  results  equally  as  satisfactory  as  those 
secured  under  the  British  system  is  due,  in  considerable  part  at 
least,  to  the  absence  of  traditions  and  conventions  governing  pub- 
lic conduct,  or  what  Mr.  Edward  Porritt  in  his  review  of  the 
British  volume  for  the  American  Political  Science  Review  so 
aptly  terms  the  "treasury  conscience." 

Several  other  volumes  relating  to  the  budgetary  problem  are  now 
in  preparation  by  the  Institute,  and  it  is  hoped  that  they  will  soon 
be  ready  for  publication.  The  first  of  these  will  give  an  histori- 
cal and  critical  account  of  the  important  efforts  made  in  recent 

vii 


PREFACE 

years  by  the  several  states  of  the  United  States  to  put  the  ad- 
ministration of  their  financial  affairs  upon  a  budgetary  basis. 
Following  this  will  be  a  study  of  the  system  of  financial  admin- 
istration of  the  United  States  government  prepared  along  the 
lines  of  the  study  of  the  British  system.  This  work,  however, 
will  be  much  more  comprehensive  than  that  study  and  will  require 
several  volumes  for  its  presentation.  The  first  will  describe  in 
detail  and  criticize  the  present  system  for  getting  before  Congress 
information  regarding  the  revenues  and  expenditures  of  the  gov- 
ernment and  revenue  and  expenditure  needs,  that  is,  the  whole 
system  of  estimates  and  financial  reports.  It  will  reveal  how 
defective  this  system  is  from  the  standpoint  of  making  known  to 
Congress  the  data  regarding  financial  operations,  conditions  and 
needs  that  that  body  should  have,  in  order  properly  to  perform 
its  function  as  a  fund-raising  and  fund-granting  authority.  Other 
volumes  will  deal  with  Congressional  procedure  and  practices  in 
respect  to  the  consideration  and  taking  action  upon  revenue  and 
expenditure  proposals;  the  system  of  treasury  accounting;  the 
disbursement  of  funds;  the  examination  and  audit  of  accounts; 
the  collection  of  the  revenue;  the  management  of  the  public  debt, 
etc. 

All  of  these  duties  are  primarily  descriptive  and  critical  in 
character.  Only  in  an  incidental  way  do  they  make  concrete 
suggestions  regarding  the  manner  in  which  defects  shown  to 
exist  may  be  corrected.  No  one  of  them,  with  the  possible  ex- 
ception of  that  of  Stourm,  attempts  to  consider  the  problem  of 
a  budget  as  a  problem,  to  subject  it  to  analysis  with  a  view  to 
bringing  out  all  of  its  factors,  and  of  making  known  those  fun- 
damental principles  which  must  find  expression  in  any  system 
of  financial  administration  if  it  is  to  give  thoroughly  satisfactory- 
results.  It  cannot  be  too  strongly  emphasized  that  the  problem 
of  the  establishment  by  the  United  States  government  of  a  proper 
budgetary  system  is  an  exceedingly  difficult  one.  It  can  be  solved 
only  by  recognizing  the  principles  that  underlie  such  a  system 
and  the  practices  that  must  be  employed  in  putting  these  prin- 
ciples into  application.  It  is  hoped  that  the  series  of  studies 
here  presented  will  at  least  make  known  what  these  principles 
are,  and  indicate  certain  of  the  more  important  steps  that  may 
be  taken  looking  to  the  improvement  of  present  conditions. 

viii 


PREFACE 

The  more  important  of  the  concrete  suggestions  here  made 
have  previously  been  made  known  through  contributions  to  the 
American  Political  Science  Review  and  the  Political  Science 
Quarterly,  and  the  author  is  indebted  to  the  editors  of  these 
journals  for  permission  to  use  these  articles  here. 

It  is  recognized  that  several  of  these  suggestions  are  of  a  seem- 
ingly radical  character.  The  situation,  however,  is  one  calling 
for  strong  measures.  As  the  writer  and  his  collaborators  pointed 
out  in  their  report  on  the  British  system,  scarcely  one  of  those 
fundamental  principles  of  financial  procedure  which  are  respon- 
sible for  the  excellence  of  that  system  finds  expression  in  our 
own  system.  "The  basic  principle  underlying  the  use  of  a  budget 
as  the  central  instrument  for  correlating  all  of  the  financial  trans- 
actions of  the  government  so  that  the  whole  problem  of  financing 
the  government  may  be  considered  at  one  and  the  same  time, 
is  hardly  understood  in  this  country,  much  less  acted  upon. 
Though  the  executive  is  called  upon  to  keep  account  of  receipts 
and  expenditures,  to  make  reports  and  to  submit  estimates,  the 
technical  problem  of  having  them  so  kept  and  submitted  as  to 
constitute  a  comprehensive  report  of  past  transactions  and  a 
work  program  for  the  future,  has  not  been  satisfactorily  worked 
out.  The  result  is  that  Congress  does  not  get  before  it  a  state- 
ment of  the  financial  and  work  program  of  the  executive  in  such 
a  form  that  it  can  clearly  see  its  full  purport.  Most  important 
of  all,  Congress,  and  not  the  executive,  is  deemed  to  be  the  body 
that  should  formulate  the  definite  program  of  receipts  and  ex- 
penditures. The  reports  and  estimates  that  are  submitted  to 
it  are  not  looked  upon  as  an  executive  program,  but  rather  as 
data  to  enable  Congress  to  perform  its  function  as  a  program- 
framing  body.  The  audit  of  accounts,  instead  of  being  made  by 
an  officer  of  the  body  granting  the  funds,  is  made  by  an  officer 
of  the  branch  of  the  government  whose  operations  are  to  be 
passed  upon.  Congress  thus  has  no  effective  machinery  for  the 
exercise  of  supervision  and  control  over  the  manner  in  which 
the  executive  performs  its  duties  such  as  is  possessed  by  the 
British  Parliament  in  its  Comptroller  and  Auditor  General  and 
its  standing  committee  on  public  accounts.  In  respect  to  the 
granting  of  funds,  the  general  principle  is  followed  that  all  ap- 
propriations are  morally,  if  not  legally,  obligatory,  that  they  rep- 

ix 


PREFACE 

resent  an  order  given  by  Congress  to  the  executive,  and  that  it 
is  the  duty  of  the  latter  to  act  upon  such  order.  The  result  is 
that  the  executive  feels  called  upon  to  expend  all  the  funds  voted 
to  it  whether  it  deems  such  expenditure  to  be  wise  or  not.  Noth- 
ing approaching  the  British  system  of  securing  flexibility  in 
the  expenditure  of  funds  by  distinguishing  between  appropria- 
tion heads  and  subheads  and  of  permitting  of  transfers  to  be 
effected  between  subheads  is  to  be  found  in  the  American  system. 
Finally,  there  is  totally  lacking  in  the  national  government  any 
organ  having  the  duty  of  exercising  a  day  to  day  supervision 
and  control  over  the  financial  transactions  of  the  government, 
such  as  the  British  government  possesses  in  its  Treasury  De- 
partment." 

A  system  so  radically  defective  can  be  remedied  only  by  meas- 
ures equally  radical.  No  mere  tinkering  with  the  existing  system, 
or,  rather,  lack  of  system,  will  in  any  degree  meet  the  needs  of 
the  case. 

W.   F.  WlLLOUGHBY. 

Postscript. — After  the  text  of  this  work  went  to  press  there  was 
introduced  in  the  House  of  Representatives  by  Hon.  Medill  Mc- 
Cormick  an  exceedingly  interesting  series  of  bills  and  resolutions 
providing  for  the  establishment  of  a  budgetary  system  and  the 
accomplishment  of  certain  collateral  reforms  such  as  the  creation 
of  an  independent  audit  system,  the  transfer  to  other  departments 
of  all  non-financial  services  now  attached  to  the  Treasury  Depart- 
ment, the  creation  by  the  House  of  Representatives  of  a  com- 
mittee on  accounts,  etc.  The  author  regrets  that,  for  the  reason 
stated  above,  he  has  been  unable  to  consider  these  measures  in  the 
body  of  his  work,  especially  since  they  call  for  the  taking  of  a 
number  of  steps  urged  by  him,  and  which  if  adopted  would  repre- 
sent a  great  advance  towards  the  establishment  of  a  scientific 
budgetary  system  for  the  national  government.  These  bills  and 
resolutions  can  best  be  consulted  in  House  Document  No.  1006, 
65th  Cong.,  2nd  Sess.,  entitled  "Plan  for  a  National  Budget 
System." 

W.  F.  W. 


CONTENTS 

CHAPTER  PAGE 

I.    THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET  I 

Essentials  of  a  Budget 2 

Contents  of  a  Budget 6 

Character  of  Expenditure  Data  Needed     .        .        .10 

Character  of  Expenditure  Documents  Needed  .  .  19 
Organization  Units  the  Primary  Basis  for  Budget 

Classification 22 

Method  of  Presentation  of  Budgetary  Data      .        .  25 

II.    THE  ADMINISTRATION  OF  A  BUDGET  SYSTEM  ...  29 

Budget  Should  be  Prepared  by  Chief  Executive  .  30 
An  Integrated  Administrative  System  the  Essential 

Basis  of  a  Proper  Budget  System      ...  31 
The  Need  for  an  Organ  of  General  Administration  33 
The  British  Treasury  as  an  Organ  of  General  Ad- 
ministration      36 

III.  LEGISLATIVE  ACTION  UPON  A  BUDGET  .  .  .  .  38 

Legislative  Modification  of  Budget  Proposals  .  .  38 
Distinction  between  a  Budget  and  an  Appropriation 

Act .  43 

Lump  Sum  versus  Itemized  Appropriations  .  .  45 
The  System  of  Transfers  between  Appropriation 

Heads ,  .  48 

The  Allotment  System 50 

Present  System  of  Itemizing  Appropriations  of  the 

National   Government 52 

IV.    THE  PROBLEM  OF  THE  ESTABLISHMENT  OF  A  BUDGET  SYS- 
TEM BY  THE  NATIONAL  GOVERNMENT  ...      55 
s*  Present   Budgetary   Practice   of  the  United   States 
Government 

A  Budget  System  Constitutional 

Excellence  of  British   Budget  System  due  to  Pro- 
cedure rather  than  Constitutional  System  .        .      59 

Adoption  of  Principle  of  Formulation  of  Budget  by 

the  President  the  First  Step       ....      62 

Creation  of  Organ  of  General  Administration  the 

Second  Step 64 

Establishment    of    a    Single    Budget    Committee   in 

House  of  Representatives  a  Third  Step     .        .      67 

Coordination    of    Budget    Procedure    in    the    Two 

Houses 69 

Comparison  of  Proposed  Plan  with  British  System      69 

xi 


CONTENTS 

CHAPTER  PAGE 

V.    THE  NATIONAL  GOVERNMENT  AS  A  HOLDING  CORPORA- 
TION:   THE  QUESTION  OF  SUBSIDIARY  BUDGETS      74 
^*    Outline   of   Plan 76 

Services    Susceptible    of  Treatment    as    Subsidiary 

Corporations 77 

Advantages  of  Plan  from  Standpoint  of  Government 

as  a  Whole 79 

Advantages  of  Plan  from  Standpoint  of  the  Indi- 
vidual Services 84 

Relation  of  Boards  of  Directors  of  Service  Corpora- 
tions to  Congress 90 

Principle  of  Subsidiary  Service  Corporations  Already 

Adopted  by  Congress  for  Territorial  Services    .      91 

Novelty   of    Present    Proposal — Application   of   this 

Principle  to  Functional  Services  ....      93 

Adoption  of  Proposed  Plan  Should  Be  Gradual      .      95 

VI.  THE  CORRELATION  OF  THE  ORGANIZATION  OF  CONGRESS 

AND   THAT  OF  THE   EXECUTIVE  FOR   BUDGETARY 
PURPOSES        .        .        „    • 96 

The  Functions  of  Congress  as  a  Board  of  Directors      96 

Failure  of  Congress  to  Organize  with  Reference  to 

the  Performance  of  this  Function  ...  98 

Failure  of  Congress  to  Concentrate  Responsibility 

for  the  Consideration  of  Appropriation  Bills  .  101 

Failure  of  Congress  to  Correlate  Its  Committee 
System  with  the  Organization  of  the  Executive 
Branch  of  the  Government 104 

Outline  of  Plan  Proposed  to  Secure  Correlation  of 

the  Two  Branches 105 

The  Problem  of  Distinguishing  between  Appropri- 
ations and  Matters  of  General  Legislation  .  .  106 

Manner  in  which  Proposed  Plan  Meets  this  Problem     108 

General   Summary 112 

VII.  ALLOTMENT   OF    FUNDS   BY   EXECUTIVE   OFFICIALS,   AN 

ESSENTIAL  FEATURE  OF  ANY  CORRECT  BUDGETARY 
SYSTEM   .  116 

The  Present  System  of  Itemizing  Appropriations    .     116 
Two  Methods  of  Financial  Control:  Through  Speci- 
fication in  Advance  and  Through  Accounts  and 
Reports  .     118 

Fundamental    Principles   that    Should   Govern   Con- 
gress  in  Appropriating  Funds     ....     122 
Outline  of   Proposed   Plan   for  Allotting   Funds  by 

Executive   Officials 123 

Advantages  of  Proposed  Plan 125 

Requirements  of  Proposed  Plan 126 

Control  by  Congress  Preserved  under  Proposed  Plan     128 
xii 


CONTENTS 

CHAPTER  PAGE 

VIII.    THE  MOVEMENT  FOR  BUDGETARY  REFORM  IN  THE  NA- 
TIONAL   GOVERNMENT    ....  .     130 

Historical  Development  of  Present  Estimates  System     131 

Basis  for  Adoption  of  Budget  System  Laid  by 
Modern  Conception  of  Place  of  President  in  our 
Political  System 135 

Act  of  March  4,  1909,  Requiring  President  to  Sub- 
mit Recommendations  as  to  how  Anticipated 
Deficiencies  May  be  Met 136 

Recommendations  by  Secretary  of  the  Treasury, 
Franklin  MacVeagh,  for  a  Budget  System, 
1909-1912  .  138 

Advocacy  of  a  Budget  System  by  President  Taft  and 
His  Commission  on  Economy  and  Efficiency, 
1911-1913  ^  .  .  .  .  .  .  143 

Movement  for  Establishment  of  a  Single  Committee 

on  Appropriations  in  the  House  ....     146 

Pending  Proposals  in  Congress  for  Establishment  of 

a  Budget  System 150 

Advocacy  of  Budget  System  by  Chamber  of  Com- 
merce of  the  United  States 153 

Endorsement    of    Budget    System    in    Platform    of 

Political    Parties    ...  ...     155 

Advocacy  of  Budget  System  by  President  Wilson    .     156 

IX.  CONCLUSION  :  ESTABLISHMENT  BY  CONGRESS  OF  A  NA- 
TIONAL COMMISSION  ON  THE  ADOPTION  OF  A 
BUDGET  THE  NEXT  STEP 158 

APPENDIX 

1.  FINANCIAL  STATEMENTS  OF  THE  INSTITUTE  FOR  GOVERN- 

MENT RESEARCH  AS  ILLUSTRATION  OF  CHARAC- 
TER OF  BUDGETARY  DATA  DESIRED      .        .        .     169 
Expenditures,   1917,  Classified  by  Funds  .  .     172 

"       Classified  by  Organization  Units     172 
"      Classified  by  Character     .        .173 
"  "      Classified  by  Activities     .        .174 

"       Classified  by  Objects  ...     178 

2.  MESSAGE  OF  PRESIDENT  TAFT  TO  CONGRESS  ON  THE  NEED 

FOR  A  NATIONAL  BUDGET,  JUNE    27,  1912  .        .     180 

3.  RESOLUTION    CREATING    A    COMMISSION    TO    REPORT   A 

PLAN  FOR  THE  ADOPTION  OF  A  NATIONAL  BUDGET 
SYSTEM 187 

4.  A  BILL  TO  PROVIDE  A  BOARD  OF  ADMINISTRATIVE  CON- 

TROL UNDER  THE  DIRECTION  OF  THE  PRESIDENT 

OF  THE  UNITED  STATES 19° 

5.  BIBLIOGRAPHY J93 

INDEX 215 

xiii 


THE  PROBLEM 
OF  A  NATIONAL  BUDGET 

CHAPTER  I 
THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

Among  the  specific  proposals  brought  forward  dur- 
ing recent  years  for  the  improvement  of  the  methods  of 
administration  of  the  national  and  state  governments, 
that  calling  for  the  adoption  by  these  governments  of  a 
proper  budgetary  system  is  much  the  most  important. 
The  adoption  of  this  device  as  an  instrument  of  admin- 
istration is  more  than  important;  it  is  vital  if  an  efficient  / 
and  economical  administration  of  public  affairs  is  to  be 
had.  Few  will  question  the  statement  that  no  govern- 
ment can  have  an  efficient  administration  unless  it  has 
evolved  an  efficient  system  for  the  administration  of  its 
finances  and,  conversely,  that  that  government  which 
has  evolved  such  a  system  has  traveled  a  long  way  on 
the  road  toward  the  achievement  of  a  satisfactory  sys- 
tem, of  administration  generally.  This  assertion  can  be 
pushed  yet  further  by  adding  to  it  the  statement  that  no 
system  of  financial  administration  can  prove  satisfac- 
tory that  is  not  based  securely  upon  what  is  known  as  a 
budget.  We  are  thus  brought  to  the  position  where 
the  budget  is  erected  into  the  central  or  determining 


:±HE  PROBEEM  OF  A  NATIONAL  BUDGET 

pf'jcSxe  whpte\problem  of  securing  governmental 
/   efficiency.    It  r^niaihs  to  prove  this  thesis. 

Essentials  of  a  Budget.  It  is  a  remarkable  fact  that 
great  as  is  the  amount  of  study  that  has  for  years  been 
given  to  the  question  of  the  budget  in  foreign  countries, 
and  extensively  as  the  question  has  been  discussed  in  re- 
cent years  in  this  country,  no  general  agreement  appears 
to  have  been  reached  as  to  the  precise  meaning  which 
should  be  attached  to  the  term  "budget."  To  some  of 
the  numerous  writers  on  the  subject  a  budget  is  a  mere 
statement  of  estimated  revenues  and  expenditures. 
Others  going  to  the  opposite  pole  make  it  synonymous 
with  a  revenue  and  appropriation  act.  The  former  con- 
ception is  most  commonly  found  in  American  commenta- 
tors, while  the  latter,  springing  naturally  from  the  close 
relation  between  the  estimates  and  the  legislative  acts 
under  European  parliamentary  systems,  is  to  be  found 
most  clearly  in  European  writers,  particularly  the 
French.1 

As  used  by  the  writer  throughout  the  following  pages 
the  term  corresponds  to  neither  of  these  conceptions. 
Were  the  budget  a  mere  estimate'  of  "revenues  and  expen- 
ditures it  would  be  palpably  absurd  to  characterize  the 
simple  and  relatively  unimportant  matter  of  the  prepara- 
tion of  such  an  estimate  as  the  master  problem  of  our 

1  Thus,  M.  Leroy  Beaulieu  writes  :  "A  budget  is  a  statement  of 
the  estimated  receipts  and  expenses  during  a  fixed  period;  it  is  a 
comparative  table  giving  the  amounts  of  the  receipts  to  be  realized 
and  of  the  expenses  to  be  incurred;  it  is,  furthermore,  an  authoriza- 
tion or  a  command  given  by  the  proper  authorities  to  incur  the  ex- 
penses and  to  collect  the  revenues."  "The  budget  of  the  state,"  says 
Rene  Stourm,  "is  a  document  containing  a  preliminary  approved  plan 
of  public  revenues  and  expenditures."  "The  budget  in  modern 
states,"  according  to  M.  G.  Jeze,  "is  a  forecast  and  an  estimate  of  all 
the  public  receipts  and  expenses  and,  for  certain  expenses  and  re- 
ceipts, an  authorization  to  incur  them  and  to  collect  them." 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

public  administration.  On  the  other  hand,  not  only  does 
the  concept  of  the  budget,  as  hereafter  developed,  not 
include  the  formal  statutory  authorization  for  the  col- 
lection and  expenditure  of  money,  but  it  is  believed  that 
serious  consequences  result  from  confounding  the  budg- 
et with  the  act  of  revenue  and  appropriation  and  at- 
tempting to  provide  for  both  estimates  and  statute  in 
the  same  document. 

What  then  is  a  budget,  as  the  term  is  here  used?  On 
analysis,  the  administration  of  the  financial  affairs  of  a 
government  will  be  found  to  involve  a  continuous  chain 
of  operations,  the  several  links  of  which  are  (i)  esti- 
mates of  revenue  and  expenditure  needs;  (2)  revenue 
and  expenditure  acts;  (3)  accounts;  (4)  audit;  and  (5) 
reports.1  An  estimate  is  first  made  of  the  expenditures 
that  will  be  required  for  the  due  conduct  of  govern- 
mental affairs  during  a  fixed  period  (this  period  being 
almost  universally  fixed  at  one  year),  together  with  a 
statement  as  to  the  manner  in  which  it  is  proposed  that 
the  money  to  meet  these  expenditures  shall  be  raised. 
On  the  basis  of  this  estimate,  revenue  and  appropria- 
tion acts  are  passed  giving  legal  authority  for  taking  the 
action  determined  upon.  Following  this  the  accounting 
department  of  the  government  opens  up  revenue  and 
appropriation  accounts  corresponding  to  the  items  of  the 
revenue  and  appropriation  acts.  The  data  recorded  in 
these  accounts  are  then  subjected  to  examination  and 
scrutiny  by  the  auditing  department  for  the  purpose  of 
ensuring  that  they  are  accurately  made,  and  that  they 

1  For  a  more  detailed  analysis  of  the  operations  involved  in  the 
administration  of  the  financial  affairs  of  a  government,  see  Chapter 
I,  "Analysis  of  the  Problem  of  Financial  Administration  of  a  Gov- 
ernment:" The  System  of  Financial  Administration  of  Great 
Britain :  W.  F.  Willoughby,  W.  W.  Willoughby  and  S.  M.  Lindsay, 
Studies  in  Administration,  Institute  for  Government  Research,  1917. 

3 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

correspond  to  the  real  facts  and  represent  a  full  compli- 
ance with  all  provisions  of  law.  The  information  fur- 
nished by  these  accounts  is  then  summarized  for  the 
period  to  which  they  relate  and  is  given  publicity  in  the 
form  of  reports.  Finally,  on  the  basis  of  the  data  con- 
tained in  these  reports,  new  estimates  for  the  next  year 
are  made  and  the  circuit  is  begun  again.  In  this  chain 
of  operations  the  budget  finds  its  place  as  the  instrument 
through  which  these  several  operations  are  correlated, 
compared  one  with  the  other,  and  brought  under  ex- 
amination at  one  and  the  same  time.  It  should  be  at 
once  a  report,  an  estimate  and  a  proposal.  It  is  the  docu- 
ment through  which  the  chief  executive,  as  the  author- 
ity responsible  for  the  actual  conduct  of  governmental 
affairs,  comes  before  the  fund-raising  and  fund-grant- 
ing authority  and  makes  full  report  regarding  the  man- 
ner in  which  he  and  his  subordinates  have  administered 
affairs  during  the  last  completed  year;  in  which  he  ex- 
hibits the  present  condition  of  the  public  treasury;  and, 
on  the  basis  of  such  information,  sets  forth  his  program 
of  work  for  the  year  to  come  and  the  manner  in  which 
he  proposes  that  such  work  shall  be  financed. 

That  the  significance  of  past  operations  and  the  pur- 
pose of  proposals  for  the  future  may  be  clearly  seen,  this 
document  must  be  complete  and  detailed.  It  must  cover 
all  the  financial  operations  of  the  government  and  cover 
them  in  such  a  way  that  the  relationship  between  past 
action  and  proposals  for  the  future  revenues  and  ex- 
penditures and  assets  and  liabilities  may  be  clearly  seen. 

The  most  important  feature  of  a  budget  is  that  it 
shall  be  all-comprehensive.  It  must  bring  together  in 
one  consolidated  statement  all  the  facts  regarding  the 
financial  condition  of  the  treasury  and  the  revenues  and 
expenditures  of  the  government,  past  and  prospective. 

4 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

It  is  obviously  imperative  that  the  appropriating  au- 
thorities, in  considering  the  problem  of  financing  the 
government,  shall  know  the  total  revenues  that  are 
available.  Furthermore,  the  work  of  making  provision 
for  the  financial  needs  of  a  government  involves  the 
consideration  of  relative  as  well  as  of  absolute  values. 
The  problem  presented  is  that  of  allotting  or  apportion- 
ing funds,  the  total  amount  of  which  is  more  or  less 
fixed,  to  purposes  in  proportion  to  their  relative  impor- 
tance or  immediate  urgency.  To  do  this  effectively  it 
is  necessary  that  the  whole  problem  of  financing  the 
government  should  be  considered  at  one  time. 

It  is  thus  of  the  essence  of  correct  budgetary  prac- 
tice that  the  general  budget  of  a  government  should 
bring  together  in  one  all-comprehensive  showing  a  com- 
plete statement  of  all  government  revenues  and  expendi- 
tures, but  it  does  not  follow  that  use  may  not  be  made 
of  special  or  subordinate  budgets  for  particular  services 
whose  operations  it  is  desirable  to  segregate  from  those 
of  the  government  generally  considered.  In  another 
chapter,  the  proposition  is  advanced  that  there  are  cer- 
tain services  of  the  national  government  of  a  purely 
industrial  or  commercial  character  and  not  related  to  ; 
the  general  operations  of  the  government,  such  as  the 
Panama  Canal,  the  Alaskan  Engineering  Commission, 
etc.,  the  financial  operations  of  which,  from  both  the 
revenue  and  the  expenditure  side,  should  be  carefully 
segregated  from  those  of  the  government  generally 
considered,  by  presentation  in  the  form  of  subordinate 
budgets,  tied  to  the  general  budget  by  items  showing 
the  net  proceeds  resulting  from  their  operation,  or  the 
appropriations  required  to  meet  their  deficits,  as  the 
case  may  be.  The  expenditures  of  these  services  do 
not  constitute  a  part  of  the  cost  of  government  in  the 

5 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

same  way  as  those  which  have  to  be  made  for  the  gen- 
eral conduct  of  government  affairs,  and  their  inclusion 
in  the  general  budget  thus  tends  to  give  a  false  picture 
of  the  progress  of  the  cost  of  government.  It  seems 
clear,  therefore,  that  the  segregation  of  these  revenues 
and  expenditures  in  subsidiary  budgets  results  in  a  more 
informative  showing  of  the  general  financial  conditions 
and  operations  of  the  government,  and  in  no  way  does 
violence  to  the  principle  that  the  general  budget  should 
present  a  comprehensive  showing  ot  the  financial  con- 
ditions and  operations  of  the  government. 
/"A  second  point,  which  is  in  the  nature  of  a  corollary 
to  the  first,  is  that  the  budget,  in  respect  to  both  its  esti- 
mate and  its  report  features,  should  be  in  the  form  of  a 
balanced  statement.  The  balancing  of  revenues  and  ex- 
penditures is  rightly  deemed  to  be  of  the  essence  of  a 
budget.  In  this  way  only  can  the  relationship  between 
the  two  sides  of  the  national  accounts  be  established, 
and  the  effect  of  the  action  had,  or  proposed,  upon  the 
financial  situation  of  the  government  be  made  known. 

Contents  of  a  Budget.  As  already  indicated,  the  cen- 
tral and  basic  element  in  a  budget  is  the  balanced  state- 
ment of  estimated  revenues  and  expenditures  for  the 
ensuing  fiscal  period,  comprehensive,  complete  and  de- 
tailed. In  connection  with  each  item  of  this  estimate 
should  be  given  a  report  of  the  corresponding  revenues 
and  expenditures  for  the  last  completed  year,  and  the 
provision  for  the  year  in  progress.  Such  a  statement 
may  be  termed  the  budget  proper,  as  it  is  to  this  state- 
ment alone  that  the  term  budget,  as  already  stated,  is 
frequently  applied.  Standing  by  itself,  however,  such 
a  statement  falls  far  short  of  furnishing  the  informa- 
tion which  the  fund-granting  authority  should  have  be- 

6 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

fore  it.    At  least  three  major  classes  of  additional  infor- 
mation are  indispensable. 

In  the  first  place,  the  budget  proper  should  be  accom-  ' 
panied  by  a  balance  sheet  showing  the  resources  and 
liabilities  of  the  national  treasury  at  the  beginning  and 
close  of  the  last  completed  official  year.  A  considerable 
difference  of  opinion  exists  among  students  of  public  ! 
finance  regarding  the  scope  and  character  that  this  state- 
ment should  have.  There  are  those  who  believe  that 
the  attempt  should  be  made  to  value  and  list  all  the 
physical  properties  of  the  government;  its  lands,  build- 
ings, equipment,  battleships,  stores,  etc.,  and  to  include 
the  totals  of  such  lists  in  the  balance  sheet.  The  writer 
is  in  thorough  accord  with  the  position  that  it  is  de- 
sirable that  a  government  should  maintain  records  fur- 
nishing as  complete  information  as  is  feasible  of  the 
amount  and  value  of  all  of  its  property.  He  believes, 
however,  that  it  would  be  a  great  mistake  to  include  any 
statement  of  the  value  of  this  property  in  the  budgetary 
balance  sheet.  Only  in  small  degree  is  any  of  this  prop- 
erty available  for  the  payment  of  national  obligations, 
or,  at  least,  those  representing  the  current  cost  of 
financing  government  operations.  The  greatest  asset 
of  a  government,  that  of  the  tax-paying  ability  of  the 
inhabitants  of  the  country  governed,  cannot  possibly 
figure  in  any  such  statement.  The  purpose  of  the  budg- 
etary balance  sheet  is  that  of  furnishing  the  informa- 
tion that  must  be  had  if  the  significance  of  operations 
during  the  past  year  and  of  those  proposed  for  the  year 
to  come  is  to  be  seen.  It  is  desirable  for  this  reason 
that  the  balance  sheet  should  confine  itself  to  a  presenta- 
tion of  the  actual  treasury  resources  and  obligations. 
Every  effort,  however,  should  be  made  to  make  this  pres- 
entation complete.  Especially  should  it  contain  a  show- 

7 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

ing  of  outstanding  obligations  in  the  form  of  bonded 
indebtedness  and  similar  fixed  charges.  In  a  support- 
ing statement  should  be  given  the  details  regarding 
these  obligations,  the  date  on  which  each  obligation  was 
incurred,  the  purpose  to  which  the  proceeds  were  ap- 
plied, the  rate  of  interest  carried,  the  terms  of  repay- 
ment, the  special  security,  if  any,  offered  for  the  guar- 
antee of  the  payment  of  interest  and  the  repayment  of 
principal,  etc. 

Next,  as  a  necessary  aid  to  an  understanding  of  the 
facts  and  proposals  presented,  the  budget  should  include 
a  series  of  tables  and  explanatory  texts  summarizing 
and  analyzing  the  revenue  and  expenditure  data  pre- 
sented from  a^number  of  points  of  view.  The  budget 
proper  can  obviously  present  a  classification  of  these 
figures  on  only  a  single  basis ;  whereas,  for  their  proper 
consideration,  classification  and  analysis  on  several  dif- 
ferent bases  are,  as  will  shortly  be  more  fully  pointed 
out,  indispensable.  The  most  desirable  form  of  classi- 
fication to  be  used  in  these  tables  will  be  described  at 
length  in  the  succeeding  section. 

Lastly,  these  financial  statements  should  be  accom- 
panied by  the  administrative  reports  of  the  chief  execu- 
tive, the  heads  of  departments  and  other  officers  in 
charge  of  the  several  services  of  the  government.  The 
writer  is  aware  that  this  proposition — that  the  annual 
reports  of  administrative  officers  should  be  made  an 
integral  part  of  the  budgetary  statement — is  a  novel 
one.  At  least,  he  has  not  seen  the  suggestion  that  this 
be  done.  A  moment's  reflection,  however,  will  show 
that  this  is  a  desirable  and  logical  requirement.  We 
have  already  taken  pains  to  point  out  that  the  budget  is 
as  much  a  reporting  as  an  estimating  operation.  The 
financial  statements  contained  in  the  budget  proper  give, 

8 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

and  can  give,  but  the  bare  figures  showing  the  financial 
results  of  these  operations.  In  order  that  their  signifi- 
cance may  be  seen  it  is  essential  that  they  should  be 
accompanied  by  statements  showing  the  results  in  terms 
of  work  accomplished  or  to  be  accomplished,  the  neces- 
sity or  utility  of  such  work,  the  problems  that  have  had 
to  be  met,  the  methods  that  have  been  or  will  have  to 
be  employed,  etc.  The  administrative  reports  thus  fur- 
nish the  means  through  which  the  figures  contained  in 
the  budgetary  statements  may  be  understood.  Without 
them  it  is  difficult,  if  not  impossible,  for  intelligent  con- 
sideration to  be  given  to  them. 

To  recapitulate:  As  an  aid  to  the  understanding  of 
the  facts  contained  in  it,  the  budget  proper  should  be 
accompanied  by  supporting  documents  which,  together 
with  the  budget  proper,  constitute  what  may  be  desig- 
nated a  budgetary  statement,  in  order  to  distinguish  it 
from  a  budget  as  that  term  is  more  usually  employed. 
Of  these,  the  following  are  the  most  important:  (i) 
A  balance  sheet  showing  the  resources  and  liabilities  of 
the  government  at  the  beginning1  and  close  of  the  year 
reported  upon;  (2)  summary  and  analytical  tables  serv- 
ing to  bring  out  the  important  features  of  the  showing^ 
made  from  the  various  viewpoints  from  which  it  is  de- 
sirable to  have  the  revenue  and  expenditures  of  a  gov- 
ernment considered;  (3)  the  report  of  the  chief  execu- 
tive in  the  form  of  a  general  budgetary  message,  and" 
(4)  the  administrative  reports  of  the  heads  of  the  sev-1 
eral  administrative  departments  and  services. 

A  budgetary  statement  is  then  a  collection  of  docu- 
ments through  wrhich  the  information  regarding  the 
condition  of  the  treasury  and  financial  operations,  past 
and  prospective,  are  brought  together,  coordinated  and 
compared  in  such  a  way  that  intelligent  action  can  be 

9 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

had  in  the  way  of  adopting  a  financial  and  work  pro- 
gram for  the  future.  The  actual  adoption  of  such  a 
program  is,  however,  a  distinct  operation  and  finds  ex- 
pression in  distinct  documents  known  as  revenue  and 
appropriation  acts.  To  confuse  the  two,  as  is  done  by 
most  writers  on  finance,  obscures  the  question  and  is 
responsible  for  much  of  the  misapprehension  that  now 
exists  in  regard  to  the  true  nature  and  functions  of  a 
budget. 

Character  of  Expenditure  Data  Needed.  It  has  al- 
ready been  pointed  out  that  the  budget  proper,  consist- 
ing of  a  statement  of  estimated  and  actual  revenues  and 
expenditure,  cannot,  no  matter  how  minute  the  detail  in 
which  it  is  drawn  up,  present  all  the  information  needed 
by  the  fund-granting  authority;  for  it  is  necessarily 
framed  upon  but  a  single  basis  of  classification;  whereas 
a  proper  consideration  of  past  and  estimated  expendi- 
tures requires  that  they  be  analyzed  and  classified  upon 
several  different  bases. 

The  writer  is  of  opinion  that  it  is  desirable  that  data 
regarding  the  cost  of  governmental  operations  should 
be  had  from  at  least  five  distinct  standpoints,  namely: 

1.  Funds 

2.  Organization  units 

3.  Activities 

4.  Character  of  expenditure 

5.  Object  of  expenditure 

As  the  first  step  in  securing  cost  data  classified  under 
these  five  heads,  the  funds,  organization  units,  activities, 
character  of  expenditure  and  object  of  expenditure  of 
the  government,  must  be  analyzed  and  a  standard  classi- 
fication established  under  each  head. 

The  necessity  for  classifying  expenditure  by  funds  is 

10 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

obvious.  Most,  if  not  all,  governments  receive  and  have 
the  administration  of  moneys  which  are  not  available 
for  general  governmental  purposes.  These  consist  of 
moneys  received  by  it  on  deposit,  gifts  for  particular 
purposes  which  the  government  has  accepted  and  obli- 
gated itself  to  administer  in  conformity  with  the  deeds 
of  gift,  special  grants  which  it  has  itself  made  of  lump 
sums  as  endowments  or  specified  items  of  income,  or 
of  current  revenues  for  special  purposes.  Each  of  these  j  - 
constitutes  a  special  fund,  the  operations  of  which  must  t\ 
be  carefully  segregated.  All  governments  also  make 
provision  for  their  expenditure  needs  by  grants  or  ap- 
propriations for  particular  purposes  or  the  support  of 
particular  services.  Each  such  grant  constitutes  a 
"fund."  When  the  grant  is  in  the  form  of  the  dedica- 
tion of  certain  receipts  to  certain  purposes,  such  funds 
have  a  current  income  as  well  as  outgo.  Manifestly, 
accounts  should  be  so  kept  and  reports  so  rendered  that 
the  revenues  and  expenditures  on  account  of  each  fund 
can  be  clearly  determined. 

Secondly:  It  is  desirable  to  know  the  precise  cost 
entailed  in  maintaining  and  operating  each  unit  of 
organization,  that  is,  of  each  branch  of  government, 
each  department,  each  bureau  or  other  subdivision  of  a 
department,  and,  finally,  of  each  operating  unit,  such 
as  a  hospital,  an  army  post  or  a  lighthouse.  Without 
such  data  it  is  impossible  definitely  to  locate  responsi- 
bility for  expenditures,  to  exercise  control  over  actual 
operating  units,  to  secure  efficiency  and  economy 
through  the  comparison  of  relative  costs  for  similar  or 
analogous  units  or  for  the  same  unit  for  a  series  of 
years,  or  intelligently  to  prepare  estimates  and  make 
appropriations  for  future  needs. 

The  classification  of  the  organization  units  of  a  gov- 

ii 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

ernment  means  the  listing  of  all  the  divisions  and  sub- 
divisions of  the  government  in  their  proper  relations 
of  superiority,  coordination  or  subordination.  In  the 
typical  modern  government  this  means,  first,  the  division 
of  the  government,  viewed  as  an  organization,  into  its 
four  grand  divisions  of  the  legislative,  the  judicial,  the 
executive  and  the  administrative  branches;  second,  the 
subdivision  of  each  of  these  branches  into  its  coordinate 
major  divisions,  as,  for  example,  the  subdivision  of  the 
administrative  branch  into  the  departments  composing 
it;  next,  the  subdivision  of  each  of  these  departments 
into  its  constituent  coordinate  bureaus,  and  these,  in 
turn,  into  their  coordinate  subdivisions,  continuing  this 
operation  until  the  final  working  units  of  the  office,  sta- 
tion, hospital,  lighthouse,  army  post,  etc.,  are  reached. 
In  making  this  classification,  care  must  be  taken  to  in- 
clude in  the  same  division  only  coordinate  units,  since 
one  of  the  main  purposes  is  to  show  the  line  of  author- 
ity. If  this  principle  is  adhered  to,  a  clear  showing  is 
made  of  the  subordinate  units  composing  each  division 
of  the  government. 

Thirdly:  It  is  equally  important  that  expenditures 
should  be  known  in  terms  of  activities  or  work  to  be 
done;  how  much,  for  example,  is  it  proposed  to  devote 
to  the  protection  of  the  country  from  foreign  aggres- 
sion, how  much  for  protection  against  internal  disorder 
or  the  prevention  and  detection  of  crime,  how  much  for 
the  promotion  of  education,  how  much  for  the  protec- 
tion of  the  public  health,  how  much  for  the  development 
of  means  of  communication,  how  much  for  the  develop- 
ment of  the  national  resources  of  the  country,  the  pro- 
motion of  industry,  agriculture  and  commerce,  and  the 
many  other  things  which  the  modern  government  under- 
takes for  the  welfare  of  its  citizens.  Many  services  of 

12 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

a  government  in  performing  their  general  functions 
engage  in  a  number  of  specific  activities.  For  example, 
the  Bureau  of  the  Census  of  the  national  government 
collects,  compiles  and  presents  statistics  of  population, 
agriculture,  manufacturing,  mining,  transportation, 
production  of  cotton,  municipal  finance,  births  and 
deaths,  wealth,  debt,  and  taxation  and  many  other  mat- 
ters. It  is  desirable  to  know  the  cost  of  procuring  and 
presenting  each  of  these  classes  of  data. 

It  is  not  necessary  to  discuss  in  detail  the  problem  of 
listing  and  classifying  the  several  activities  of  govern- 
ment. Though  the  work  to  be  done  is  analogous  in 
character  to  that  of  listing  and  classifying  the  units  of 
organization,  its  accomplishment  presents  greater  diffi- 
culties. This  is  due  to  the  fact  that  here  we  do  not 
have  fixed  conditions  to  deal  with.  The  activities  of 
government  are  exceedingly  varied  and  may  be  classi- 
fied in  many  ways.  It  is  necessary,  therefore,  to  decide 
regarding  not  only  those  activities  of  the  government 
which  are  deemed  to  be  of  sufficient  importance  to  war- 
rant their  being  distinguished  from  other  activities,  but 
the  principle  of  classification  to  be  employed. 

Fourthly:  Information  should  be  available  regard- 
ing the  character  of  these  expenditures;  that  is,  how 
much  goes  for  (i)  capital  outlay;  (2)  fixed  charges; 
and  (3)  current  expenses. 

By  capital  outlay  is  meant  those  expenditures  which 
result  in  the  acquisition  of  fixed  properties,  such  as 
land,  buildings  or  equipment,  or  that  result  in  the  re- 
duction of  fixed  or  long-term  liabilities,  such  as  bonded 
debt.  In  other  words,  capital  outlay  comprises  those 
transactions  which  go  to  increase  the  net  capital  invest- 
ment of  the  service  either  by  increasing  its  fixed  prop- 
erties, or  by  decreasing  its  bonded  debt. 

13 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

By  fixed  charges  is  meant  expenditures  which  are 
required  to  carry  on  current  activities  but  in  respect  to 
which  the  administrative  and  appropriating  authorities 
have  no  choice  of  action  since  they  constitute  obliga- 
tions created  by  previous  administrations  which  must 
be  met.  Examples  of  fixed  charges  in  governmental 
operations  are:  interest  on  bonded  indebtedness,  pen- 
sions, and  grants  and  subsidies  to  subordinate  govern- 
mental units.  Expenditures  for  such  items  as  rent, 
taxes,  insurance,  etc.,  should  not  be  treated  as  fixed 
charges,  even  though  they  represent  fixed  obligations, 
since  they  constitute  integral  items  of  current  expense 
and  should  appear  under  that  head. 

By  current  expenses  is  meant  those  expenditures  that 
are  required  to  carry  on  the  current  activities  of  the 
government  and  which  do  not  result  in  the  production 
or  acquisition  of  assets  or  in  the  liquidation  of  liabili- 
ties. Current  expenses  are  distinguished  from  fixed 
charges  in  that  they  are  essential  to  the  conduct  of  cur- 
rent activities  and  are  subject  to  administrative  and 
legislative  discretion,  whereas  fixed  charges  are  a  com- 
pulsory burden,  the  result  of  obligations  created  in 
prior  years.1 

though  accountants  are  agreed  that,  in  all  undertakings  of  im- 
portance, public  and  private,  the  threefold  distinction  of  expenditures 
according  to  their  character  here  set  forth  is  one  that  should  be  made, 
they  are  not  always  in  agreement  in  respect  to  where  the  line  should 
be  drawn  between  the  three.  Thus,  many  accountants  assign  expendi- 
tures for  rent,  insurance,  taxes,  etc.,  to  fixed  charges  instead  of  cur- 
rent expenditures.  In  the  opinion  of  the  writer,  this  practice,  if  one 
keeps  firmly  in  mind  the  purpose  in  view  in  making  the  threefold 
distinction,  can  scarcely  be  justified,  certainly  not  when  the  under- 
taking is  of  a  governmental  character.  The  distinction  as  drawn 
above,  it  will  be  observed,  rests  primarily  upon  a  time  factor.  Capital 
-^outlays  represent  expenditures  the  benefits  of  which  accrue  largely  in 
the  future;  fixed  charges  represent  expenditures  made  on  account  of 
benefits  received  in  the  past;  while  current  expenses  represent  ex- 
penditures for  present  benefits.  It  is  quite  likely  also  that  all  account- 
ants will  not  agree  with  the  definition  above  given  of  the  three  classes 

14 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

Finally,  if  an  adequate  check  is  to  be  had  upon  ex- 
penditures, data  should  be  at  hand  regarding  the  object 
of  the  expenditures;  that  is,  how  much  goes  for  each 
category  of  things,  services  or  materials  purchased; 
how  much,  for  example,  in  the  way  of  salaries  for  per- 
sonal service,  how  much  for  transportation,  how  much 
for  heat,  light,  power  and  every  other  kind  of  service 
or  material  made  use  of  by  the  government.  The  mak- 
ing of  a  classification  of  this  kind  is  a  task  of  consider- 
able magnitude  and  involves  the  settlement  of  a  large 
number  of  perplexing  questions  in  respect  to  the  places 
that  should  be  assigned  particular  commodities  or  ob- 
jects of  expenditure.  Fortunately,  however,  it  is  a 
work  which  has  been  performed  by  all  large  corpora- 
tions and  by  not  a  few  governments  in  the  United 
States;  and  the  existence  of  their  classifications  saves  a 
large  part  of  the  work  that  would  otherwise  Have  to  be 
performed  by  other  organizations  desiring  to  develop 
such  a  classification.  One  of  the  most  complete  schemes 
of  this  character  is  that  made  by  the  President's  Com- 
mission on  Economy  and  Efficiency. 

If  information  regarding  expenditures  is  available 
from  these  several  standpoints  the  operations  of  gov- 

of  expenditures.  It  would  not  be  in  place  to  enter  here  upon  a  consid- 
eration of  the  technical  accounting  questions  presented.  All  that  is 
needed  is  to  point  out  the  desirability  that  all  systems  of  government 
accounting  and  reporting  should  make  these  distinctions. 

Many  accountants  would  also  probably  urge  that  the  distinguishing 
of  expenditures  according  to  character  should  be  carried  much  far- 
ther than  here  indicated;  that,  for  example,  expenditures  should  be 
recorded  and  reported  according  to  subdivisions  under  each  of  the 
three  heads.  Whatever  may  be  the  theoretical  arguments  in  favor 
of  doing  this,  expediency,  in  the  opinion  of  the  writer,  dictates  that 
this  should  not  be  attempted  at  the  present  time.  The  primary  dis- 
tinction here  urged  can  be  made  with  comparative  ease:  to  attempt 
to  push  the  distinction  much  farther  gives  rise  to  many  questions  in 
the  practical  operation  of  the  system  and  would  greatly  complicate 
and  render  more  difficult  the  work  of  government  bookkeeping. 

IS 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

ernment  may  be  studied  and  planned  from  almost  any 
desired  angle.1  It  is  possible  to  determine  not  only  the 
cost  and  needs  of  a  particular  service,  subdivision  of  a 
service,  or  group  of  subdivisions  or  services,  but  the 
items  of  this  cost  or  of  these  needs,  whether  in  terms 
of  activities  performed  or  things  purchased.  Or,  re- 
versing the  order  of  consideration,  the  cost  and  needs 
of  any  activity  or  class  of  activities  may  be  determined 
in  terms  of  services  engaged  in  the  performance  of  these 
activities,  or  in  terms  of  things  purchased  in  perform- 
ing them. 

Before  turning  to  a  consideration  of  the  accounting 
and  reporting  system  needed  to  develop  information  re- 
garding expenditures  under  the  several  heads  men- 
tioned, attention  should  be  called,  in  passing,  to  the  high 
value,  from  an  administrative  standpoint  quite  apart 
from  their  value  for  budgetary  purposes,  which  may  be 
made  to  attach  to  classifications  of  organization  units 
and  of  activities  of  the  character  above  described. 

The  results  of  the  analysis  and  classification  of  or- 
ganization units  can  be  shown  in  a  number  of  ways — 
by  charts,  by  a  process  of  successive  indentations  in  the 
listing  of  the  units,  or  by  a  scheme  of  primary  and  sup- 
porting sheets.  Of  these  several  methods  the  latter  is 
much  to  be  preferred.  Its  advantages  are  twofold.  It 
brings  coordinate  units  into  immediate  juxtaposition, 
and  permits  changes  to  be  made  in  the  presentation  as 
changes  occur  in  organization  without  requiring  the 
whole  classification  to  be  made  over.  Under  this  method 
each  class  of  coordinate  units  is  shown  on  a  separate 

1  For  a  practical  illustration  of  expenditures  of  a  service  reported 
from  these  five  viewpoints,  see  Appendix  I  in  which  are  given  the 
financial  statements  of  the  Institute  for  Government  Research  during 
the  first  year  of  its  operations. 

16 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

sheet.  For  example,  sheet  number  i  would  show  the 
four  branches  of  the  government,  the  legislative,  the 
judicial,  the  executive  and  the  administrative.  The 
first  supporting  sheet  for  the  administrative  branch 
would  show  the  several  departments  composing  that 
branch.  Each  of  these  departments  would  have  a  sup- 
porting sheet  showing  the  coordinate  bureaus  or  other 
services  into  which  it  is  divided.  Each  of  these  bureaus 
in  turn  would  have  its  supporting  sheet  showing  its  sub- 
divisions— a  process  that  would  be  continued  until  the 
final  working  unit  is  reached.  Each  such  final  unit  would 
have  a  sheet  of  its  own  which  would  show  in  detail  its 
organization  and  personnel.  These  sheets  should  not  be 
bound  together  but  should  be  filed  loose  in  vertical  cases 
as  are  the  cards  in  the  card  catalog  of  a  library.  When 
so  filed  in  their  proper  order  they  would  furnish  a  com- 
plete outline  of  the  organization  of  the  government.  It 
is  evident  that  if  this  method  of  presentation  is  em- 
ployed it  is  an  easy  matter  to  keep  the  outline  constantly 
revised  to  date.  If  a  new  unit  is  created  all  that  is 
required  is  that  a  new  sheet  should  be  prepared  for  it 
and  inserted  in  its  proper  place,  and  the  necessary  entry 
made  on  the  sheet  that  it  supports.  If  a  unit  is  abol- 
ished its  sheet  can  be  removed  and  the  corresponding 
change  be  made  on  the  sheet  it  supports.  In  like  man- 
ner any  change  in  organization  can  be  recorded  by  sim- 
ply making  the  changes  required  on  the  one  or  two 
sheets  affected. 

It  is  hardly  necessary  to  point  out  the  value  that  such 
a  record  has  as  an  instrument  of  administration.  It 
enables  the  administrator  at  once  to  learn  how  any  sub- 
division of  his  service  is  organized  and  managed,  no 
matter  where  that  subdivision  may  be  located,  and  to 

17 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

keep  track  of  all  changes  in  organization  and  personnel 
as  they  occur.  It  would  take  us  too  far  from  our  sub- 
ject to  attempt  to  point  out  the  many  other  valuable 
uses  to  which  such  a  record  could  be  put.  It  may  be  of 
interest  to  note  that  the  preparation  of  an  outline  of 
organization  of  the  national  government  of  the  United 
States  constituted  one  of  the  first  steps  taken  by  the 
Commission  on  Economy  and  Efficiency,  appointed  by 
President  Taft,  for  the  devising  of  means  by  which  the 
national  government  might  be  put  upon  a  more  eco- 
nomical and  efficient  basis.1  It  should  be  noted,  further- 
more, that  the  work,  though  apparently  one  of  magni- 
tude, is  by  no  means  so  difficult  as  might  at  first  sight 
appear.  Moreover,  it  is  one  which,  as  stated,  once 
made,  can  be  kept  up  to  date  with  slight  effort. 

Similarly,  a  classification  of  the  activities  of  a  govern- 
ment furnishes  a  tool  of  administration  that  is  of  great 
value,  apart  from  its  serving  as  the  essential  basis  of  a 
system  of  accounts  that  will  show  expenditures  from 
the  standpoints  of  activities  and  functions.  It  furnishes 
the  most  effective  showing  that  can  be  made  in  brief 
compass  of  the  nature  of  the  work  being  done  by  a 
government.  By  indicating  for  each  activity  the  service 
or  services  performing  it,  the  basis  is  laid  for  a  con- 
sideration of  the  whole  problem  of  regrouping  services, 
and  redistributing  activities  among  the  services,  so  as 
to  eliminate  overlapping  and  duplication  of  organiza- 
tion and  work  and  secure  generally  a  better  integration 
and  coordination  of  the  administrative  work  of  the 
government. 

1  Message  of  the  President  of  the  United  States  on  Economy  and 
Efficiency  in  the  Government  Service.  Appendix.  Report  to  the 
President  on  the  Organization  of  the  Government  of  the  United 
States  as  it  existed  July  i,  1911.  House  Doc.  No.  458,  62d  Congress, 
2d  Sess.,  2  vols.,  1912. 

18 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

Character   of   Expenditure   Documents   Needed.      The 

classifications  of  expenditures  under  the  several  heads 
discussed  having  been  established,  it  remains  to  so  re- 
vise the  accounting  system  of  the  government  as  to  de- 
velop the  information  required  in  accordance  with  those 
classifications.  Manifestly,  data  of  these  several  kinds 
cannot  be  had  unless  the  system  of  accounts  of  a  gov- 
ernment is  devised  with  a  view  to  their  production.  It 
is  just  at  this  point  that  most  systems  of  government 
bookkeeping  are  defective.  The  careful  recording  of 
all  financial  transactions  and  the  rendering  of  accounts 
and  reports  may  be  said  to  have  two  ends  in  view :  ( I ) 
The  establishment  of  fidelity  on  the  part  of  all.  officers 
having  to  do  with  the  administration  of  financial  af- 
fairs; and  (2)  the  development  of  the  data  regarding 
financial  conditions  and  operations,  such  as  have  just 
been  described.  Unfortunately  the  accounting  system  of 
our  national  government,  as  of  most,  if  not  all,  our  states 
and  of  many  of  our  minor  political  divisions,  has  been 
devised  wholly  with  a  view  to  the  first  end,  namely,  that 
of  determining  the  fidelity  of  financial  officers  in  the  dis- 
charge of  their  duties.  These  systems  thus  fail  to  pro- 
duce the  information  required  for  making  due  pro- 
visions for  the  expenditure  needs  of  the  government  and 
for  controlling  the  expenditure  of  funds  granted. 

Without  here  entering  into  any  discussion  of  techni- 
cal accounting  practice,  it  may  be  stated  that  two  steps 
are  essential  if  the  desired  information  is  to  be  secured: 
(i)  A  uniform  system  of  expenditure  documents  must 
be  installed  that  will  secure  with  respect  to  each  ex-/ 
penditure  information  regarding  its  classification  under 
each  of  the  heads  above  described;  (2)  the  system  of 
accounts  must  be  so  designed  as  to  facilitate  the  record- 
ing and  summarization  of  this  information. 

19 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

The  starting  point  in  all  accounting  operations  is  the 
execution  of  a  series  of  documents  recording  all  essen- 
tial facts  regarding  financial  transactions.  In  the  case 
of  expenditures,  these  documents  consist  of  requisitions 
for  supplies  or  services,  purchase  orders,  invoices, 
vouchers,  pay-rolls,  etc.  Collectively  these  papers  have 
received  the  designation  of  expenditure  documents. 
From  these  papers  are  taken  the  data  for  entry  in  the 
accounts  of  expenditures.  It  follows,  therefore,  that 
all  distinctions  which  it  is  desired  to  make  in  the  ac- 
counts must  find  expression  in  some  one  or  all  of  these 
documents.  Concretely,  therefore,  the  problem  of  se- 
curing information  regarding  expenditures  in  accord- 
ance with  the  five  schemes  of  classification  that  we  have 
described  requires  the  formulation  and  adoption  of  a 
system  of  expenditure  documents  calling  for  the  state- 
ment, in  respect  to  each  expenditure,  of  the  fund  charge- 
able, the  organization  unit  on  whose  account  it  is  made, 
the  activity  on  account  of  which  it  is  made,  the  char- 
acter of  the  expenditure,  and  the  object  or  thing  pur- 
chased. With  these  facts  entered  upon  these  documents, 
it  is  but  a  matter  of  simple  bookkeeping  to  record  the 
figure  showing  the  result  of  the  transactions  from  the 
several  desired  points  of  view. 

The  use  of  these  schemes  of  classification  is  much 
facilitated  by  the  designation  of  each  item  in  them  by 
an  appropriate  numerical  symbol  and  the  employment 
of  these  symbols  instead  of  the  names  of  the  items  them- 
selves in  the  execution  of  the  expenditure  documents. 
Thus,  if  the  Division  of  Vital  Statistics  is  the  fourth 
division  of  the  Bureau  of  the  Census,  which  is  the 
twelfth  of  the  bureaus  of  the  Department  of  Commerce, 
which  is  the  ninth  of  the  Administrative  Departments, 
which  last  figures  as  the  fourth  of  the  four  great 

20 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

branches  of  the  government,  it  would  receive  the  nu- 
merical symbol  of  4-9-12-4.  In  like  manner  each  of  the 
groups  of  activities  and  specific  activities,  and  each 
class,  sub-class  and  item  of  objects  of  expenditure  would 
have  its  proper  numerical  designation. 

The  advantages  of  this  scheme  of  symbols  are  that  it 
is  susceptible  of  indefinite  expansion,  that  it  shows  not 
only  the  particular  item  but  the  place  of  this  item  in 
the  scheme  of  classification,  and  that  it  lessens  greatly 
the  work  of  filling  out  the  expenditure  documents.  It 
is  not  necessary  that  officers  of  the  government  should 
familiarize  themselves  with  the  entire  list  of  symbols. 
Each  division,  of  course,  knows  its  own  symbol  and 
those  of  its  subordinate  divisions.  These  can,  if  de- 
sired, be  stamped  or  printed  on  the  expenditure  docu- 
ment forms  used  by  it.  The  same  is  true  with  respect 
to  the  activities  performed  by  it  and,  in  large  part,  its 
objects  of  expenditure,  since  the  expenditures  of  most 
services  are  for  a  relatively  few  of  the  total  objects  of 
government  expenditure. 

The  use  of  these  symbols  also  aids  greatly  in  com- 
piling from  these  documents  data  regarding  expendi- 
tures. Thus,  for  instance,  following  the  example  given, 
it  is  known  that  all  vouchers  or  other  documents,  the 
symbols  of  which  appearing  in  the  space  for  the  desig- 
nation of  the  organization  unit  have  4  as  their  first 
integer,  represent  the  administrative  branch  of  the  gov- 
ernment, all  those  having  2  as  the  first  and  9  as  the 
second  integer,  the  Department  of  Commerce,  etc.  It 
is  thus  an  easy  matter  to  transcribe  expenditures  as  re- 
corded on  expenditure  documents  according  to  organ- 
ization units.  In  precisely  the  same  manner  total  ex- 
penditures according  to  activities,  character  and  object 
of  expenditure  can  readily  be  obtained. 


21 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

These  various  data,  it  is  evident,  can  also  be  obtained 
in  combination.  Thus  the  total  expenditure  of  an  or- 
ganization unit  can  be  shown  by  subordinate  organiza- 
tion units,  by  activities,  by  character,  and  by  object  of 
expenditure;  or  the  total  expenditure  for  a  given  class 
of  activities  can  be  shown  by  specific  activities,  by 
organization  units,  and  by  character,  and  object  of 
expenditure.1 

Organization  Units  the  Primary  Basis  for  Budget  Classi- 
fication. The  foregoing,  though  it  may  seem  to  rep- 
resent a  long  digression  from  the  subject  of  our  paper, 
is  not  so  in  fact.  No  satisfactory  budgetary  sys- 
tem can  be  established  unless  the  proper  basis  for  such 
a  system  is  laid  in  the  adoption  of  a  scheme  of  expendi- 
ture documents  and  accounting  practices  calculated  to 
produce  the  information  which  must  be  furnished  by  a 
budget  if  it  is  fully  to  serve  its  purpose  as  an  informa- 
tion document.  It  is  also  an  essential  part  of  our  pur- 
pose to  discuss  not  only  what  character  of  budgetary 
system  should  be  established,  if  it  is  desired  to  put  the 
administration  of  the  finances  of  a  government  upon  a 
scientific  basis,  but  how  this  system  can  actually  be 
achieved. 

We  have  pointed  out  that  expenditure  data  may  be 
compiled  from  any  of  the  five  points  of  view  represented 
by  the  five  schemes  of  classification  that  have  been  de- 
scribed. It  becomes  necessary,  therefore,  that  a  govern- 
ment shall  make  a  decision  regarding  which  of  the  five 

1The  whole  problem  of  the  system  of  expenditure  documents,  the 
use  of  symbols  and  accounting  and  reporting  methods  generally  re- 
quired in  order  to  produce  the  financial  data  desired  has  been  worked 
out  with  great  care  by  the  Institute  for  Government  Research.  The 
procedure  employed  by  it  in  its  own  accounting  is  set  forth  in  detail  in 
its  Accounting  Manual. 

22 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

shall  be  adopted  as  the  primary,  and  which  as  the  sub- 
ordinate, factors  in  the  formulation  of  the  estimates 
and  report  of  expenditures  which  constitute  the  budget 
proper.  Whichever  scheme  is  adopted  should  be  rigidly 
adhered  to,  for,  unless  it  is,  no  consistent  or  logical  ex- 
position of  financial  operations  and  needs  is  presented 
from  any  one  point  of  view.  The  violation  of  this  fun- 
damental principle  constitutes  one  of  the  most  serious 
defects  of  budgetary  practice  in  almost  all  governments. 
Their  budgets  show  expenditures  and  estimates,  partly 
in  terms  of  organization  units,  partly  in  terms  of  activi- 
ties, partly  in  terms  of  character  and  partly  in  terms  of 
objects  of  expenditure.  It  is  thus  exceedingly  difficult, 
if  not  impossible,  to  summarize  the  data  from  any  one 
viewpoint,  and  to  appreciate  the  full  purport  of  the  fig- 
ures in  terms  either  of  administration,  responsibility,  or 
general  policy. 

In  reaching  a  decision  regarding  the  principle  of  pres- 
entation that  should  be  employed  in  formulating  a  budg- 
et, there  can  scarcely  be  any  question  that  the  choice 
of  the  primary  factor  of  classification  should  fall  upon 
the  unit  of  organization.  The  budget,  in  a  word,  should 
have  as  its  primary  purpose  to  show  expenditures  and 
estimates  according  to  the  units  by  which  they  were 
made,  or  for  whose  use  the  funds  estimated  for  are  ) 
intended.  The  primary  showing  will  thus  be  that  of 
the  actual  and  estimated  cost  of  maintaining  and  operat- 
ing each  unit  and  class  of  units  of  organization  of  the 
government. 

A  number  of  reasons  unite  to  make  this  choice  desir- 
able.   In  the  first  place,  it  is  important  to  emphasize  in  j 
every  possible  way  the  factor  of  personal  responsibility. 
In  the  actual  organization  and  conduct  of  the  affairs  of 
government,   individuals   are  in   charge  of  particular 

23 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

divisions  or  subdivisions  of  the  government  and  not  in 
charge  of  the  performance  of  particular  categories  of 
work,  except  in  so  far  as  such  particular  categories  are 
intrusted  to  particular  organization  units.  As  a  result, 
individual  responsibility  consists  in  expending  money 
and  estimating  the  needs  of  such  subdivisions  of  organi- 
zation. In  actual  preparation  of  estimates,  the  individ- 
uals constituting  the  direct  personnel  make  estimates  of 
the  needs  of  the  services  under  their  direction  and  for- 
ward them  to  the  official  next  in  authority  above 
them.  Here  they  are  scrutinized,  criticized,  revised  and 
aggregated,  and  again  forwarded  to  the  person  next  in 
rank — this  process  being  continued  until  the  final  ag- 
gregation is  secured.  If  a  man's  estimates  are  broken 
up  and  scattered  in  different  parts  of  a  budget  it  is 
bound  to  lead  to  confusion  and  make  it  difficult  for  the 
legislator  to  reach  the  proper  man  or  proper  adminis- 
trative report  for  further  information.  Only  by  keep- 
ing accounts  and  making  reports  according  to  organi- 
zation units  is  it  possible  to  determine  the  efficiency  with 
which  the  individual  services  are  being  run.  Only  as 
the  heads  of  services  know  that  their  services  are  going 
to  be  considered  on  the  basis  of  the  work  for  which  they 
are  individually  responsible  will  there  exist  a  real  incen- 
tive to  efficiency  and  economy.  This  being  the  necessary 
basis  for  accounting  and  reporting,  it  is  of  prime  im- 
portance that  the  budget  and  appropriations  should  be  in 
conformity  with  it. 

It  is,  moreover,  desirable  that  the  budget  and  the 

i  appropriation  acts  based  upon  it  should  present  in  out- 

7  line  as  complete  a  picture  as  possible  of  the  organization 

of  the  government.    They  should  reveal  at  a  glance  just 

what  departments,  bureaus  and  subdivisions  are  being 

maintained,  their  relations  to  each  other,  and  the  per- 

24 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

sonnel  required  by  each.  If  a  budget  is  properly  pre- 
pared it  will  constitute  an  invaluable  document  revealing 
the  structure  of  the  government.  Without  such  a 
knowledge  it  is  impossible  to  give  intelligent  considera- 
tion to  the  national  finances. 

The  argument  in  favor  of  the  employment  of  the  unit 
of  organization  as  the  basis  for  the  presentation  of  bud- 
get data  does  not  ignore  the  desirability  of  furnishing 
information  regarding  expenditures  from  the  other 
points  of  view.  The  latter  information  may  appear  as 
sub-items  under  the  totals  for  the  organization  units, 
thus  furnishing  detailed  information  regarding  the  pur- 
poses, character,  and  object  of  expenditure  as  incurred 
or  estimated  for.  The  expenditures  of  the  government 
as  a  whole  will  be  collated  from  each  of  these  several 
viewpoints  in  the  analyses  which,  as  has  been  stated, 
should  accompany  the  budget  proper.  In  these  analyses, 
the  total  expenditures  of  the  government,  actual  and 
estimated,  will  be  shown  classified  by  activities,  by  char- 
acter, and  by  objects,  with  organization  units  appearing 
as  the  subsidiary  items.  Information  will  thus  be  fur- 
nished regarding  the  total  expenditures  of  the  govern- 
ment for  any  given  activity  or  class  of  activities,  such 
as  public  defense,  education,  or  public  health,  or  for  any 
given  object  or  class  of  objects,  such  as  salaries  and 
wages,  or  munitions  of  war,  itemized  according  to  the 
division  of  the  government  responsible  for  them. 

Method    of    Presentation    of    Budgetary    Data.     Two 

kinds  of  information  are  required  regarding  the  financial 
operations  of  a  government — general  and  particular. 
For  the  formulation  of  general  policies,  information  re- 
garding total  expenditures  according  to  a  few  grand 
divisions  is  required.  On  the  other  hand,  to  ensure  that 

25 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

money  voted  will  be  applied  in  an  effective  manner,  and 

to  maintain  a  proper  supervision  and  control  over  actual 

expenditures,  information  regarding  the  details  of  ex- 

\  penditures  by  particular  units,  or  for  particular  activi- 

\\  ties  or  objects,  is  needed.    A  budget,  which  is  essentially 

>  an  information  document,  should  present  both  classes  of 

information  in  the  clearest  manner  possible. 

Both  of  these  objects  can  be  obtained  if  the  principle 
of  presentation  adopted  is  that  of  proceeding  from  the 
general  to  the  particular,  and  the  means  employed  for 
•  putting  this  principle  into  application  is  that  of  primary 
and  supporting  tables.  Under  this  scheme,  the  first 
table  will  be  that  showing  the  total  expenditures  of  the 
government  for  the  last  completed  year,  the  total  of 
appropriations  for  the  year  in  progress,  and  the  total 
of  the  estimates  for  the  year  to  be  provided  for.  This 
table  will  be  supported  by  a  second  table  showing  the 
items  entering  into  these  totals  by  the  four  great 
branches  of  the  government,  the  legislative,  the  judicial, 
the  executive  and  the  administrative,  and  their  primary 
divisions,  such  as  the  administrative  departments  in  the 
case  of  the  administrative  branch.  This  table  in  turn 
will  be  supported  by  a  series  of  tables  in  which  the  totals 
for  each  division  shown  are  further  itemized  by  their 
primary  divisions,  a  process  which  can  be  continued 
until  a  series  of  tables  is  reached  giving  the  expendi- 
tures, appropriations  and  estimates  for  the  final  units 
of  organization. 

This  scheme  of  presentation  has  a  number  of  notable 
advantages.  In  the  first  place,  it  makes  it  possible  for 
the  legislator,  or  anyone  interested  in  the  administra- 
tion of  the  national  finances,  to  confine  his  attention  to 
grand  totals,  or  to  push  his  inquiries  as  far  into  details 
as  he  may  desire.  Secondly,  and  more  important  still, 

26 


THE  NATURE  AND  FUNCTIONS  OF  A  BUDGET 

it  brings  into  immediate  juxtaposition  figures  which 
should  be  shown  side  by  side  in  order  that  they  may  be 
compared.  Thus,  for  example,  the  total  expenditures 
of  the  several  administrative  departments,  or  the  total 
expenditures  for  the  primary  bureaus  of  a  department 
will  be  shown  in  compact  tables  showing  nothing  but 
these  totals.  If  the  department  having  charge  of  public 
health  matters  maintains  and  operates  a  score  or  more 
of  hospitals,  the  total  expenditures  of  each  of  these  hos- 
pitals and  of  all  combined  will  be  shown  in  one  place  so 
that  they  can  be  compared.  If,  on  the  other  hand,  a 
question  *is  raised  regarding  the  expenditure  of  a  par- 
ticular hospital,  all  that  is  necessary  is  to  turn  to  the 
supporting  table  giving  the  details  of  the  expenditures 
of  that  particular  institution. 

It  is  hardly  necessary  to  dilate  upon  the  advantages  of 
this  method  of  presenting  budgetary  data,  for  it  must  be 
evident  how  completely  and  clearly  it  meets  the  various 
demands  for  information  regarding  governmental  ex- 
penditures. One  point  further  may,  however,  be  men- 
tioned. In  a  government  of  law,  no  expenditure  is  legal 
unless  made  in  pursuance  of  statutory  authority.  In  the 
supporting  tables  giving  the  details  of  expenditure,  it  is 
desirable,  therefore,  that  provision  should  be  made  for 
an  additional  column  in  which  reference  is  made  to  the 
statute,  or  order  issued  in  pursuance  of  statute,  author- 
izing the  establishment  and  operation  of  the  unit  in- 
volved, the  undertaking  of  the  work,  or  the  making  of 
the  particular  expenditure  recorded.  Finally,  it  may  be 
stated  that  this  whole  question  of  the  manner  of  com- 
piling and  presenting  budgetary  data  has  been  consid- 
ered thus  fully,  not  only  on  account  of  its  intrinsic 
importance,  but  because  most  nations  have  signally 
failed  to  formulate  their  budgets  in  such  a  manner  that 

27 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

the  figures  contained  in  them  may  be  readily  used  for 
the  purposes  of  formulating-  national  policies  or  exer- 
cising a  proper  control  in  respect  to  the  manner  in 
which  the  affairs  of  government  are  actually  adminis- 
tered. 


CHAPTER  II 

THE  ADMINISTRATION  OF  A  BUDGET 
SYSTEM 

The  dominating  principle  of  a  budget,  as  outlined  in 
the  preceding  chapter,  is  that  it  is  at  once  a  comprehen- 
sive report  and  a  complete  financial  and  work  program 
covering  all  the  operations  of  a  government.  It  is  the 
means  through  which  the  authority  responsible  for  the 
actual  conduct  of  affairs  lays  before  the  legislative 
branch  of  the  government  its  report  of  the  manner  in 
which  it  has  discharged  its  duties  and,  on  the  basis  of 
this  report,  its  financial  and  work  program  for  the 
future.  It  is,  therefore,  of  the  essence  of  a  budget  that 
it  shall  be  formulated  by  the  executive  and  by  the  execu- 
tive alone. 

If  it  is  the  function  of  the  executive  to  propose  ex- 
penditures, that  function  should  not  be  participated  in 
by  any  other  branch  of  the  government.     This  means  \ 
that  the  legislative  branch  should  be  debarred  from,  or,  I 
if  it  possesses  the  constitutional  authority,  should  re- 
frain from,  using  the  right  to  initiate  proposals  for  the  • 
expenditure  of  money.     No  appropriation   of  money 
^bould  be  made  except  upon  the  direct  request  of  the 
executive.    The  reason  for  this  is  twofold.    In  the  first 
place,  it  is  a  canon  of  administration  that  accountability 
can  be  enforced  and  efficiency  secured  only  when  respon- 
sibility is  definitely  located  in  a  single  authority.     Sec- 
ondly, the  executive  alone  is  in  a  position  to  determine 

29 


* 

THE  PROBLEM  OF  A  NATIONAL  BUDGET 

in  detail  the  administrative  needs  of  the  government 
and  intelligently  to  formulate  an  annual  work  program. 
It  alone  is  in  immediate  charge  of  governmental  opera- 
tions. It  is  directly  familiar  with  governmental  needs. 
It  can  be  held  to  a  strict  accountability  for  the  manner 
in  which  it  carries  out  all  of  its  proposals.  Members 
of  a  legislative  body  have  no  such  advantages  and 
responsibilities.  What  information  they  have  is  second- 
hand. They  have  no  responsibility  for  the  execution  of 
work  ordered.  No  means  exist  by  which  they  can  be 
held  to  a  proper  accountability  for  the  manner  of  its 
performance. 

Budget  Should  Be  Prepared  by  Chief  Executive.    But 

it  is  not  sufficient  merely  that  the  budget  should  origi- 
nate in  the  executive  branch  of  the  government  rather 
than  the  legislative.  The  budget  serves  its  true  function 
only  when  it  represents  the  action  of  the  administration 
as  a  unified  and  integrated  whole.  Nor  will  this  be  ac- 
complished by  a  merely  nominal  emanation  of  the  budget 
from  the  Chief  Executive.  It  must  be  impossible  for 
the  heads  of  the  departments  themselves  directly  to 
bring  before  the  legislature  revenue  or  expenditure  pro- 
posals. Only  as  this  prohibition  is  rigidly  enforced  is 
it  possible  to  present  a  consistent  and  well  thought-out 
work  program. 

Our  own  government  furnishes  many  illustrations  of 
the  evils  resulting  from  a  disregard  of  this  principle. 
There  is  scarcely  a  Congress  that  does  not  witness 
phenomenon  of  members  of  the  President's  Cabinet,  a'n 
often  of  mere  bureau  chiefs,  urging  conflicting  claims 
upon  Congress.  One  authority  asks  appropriations  to 
permit  it  to  do  certain  things  in  total  disregard  of  the 
fact  that  the  same  field  is  already  occupied  by  other 

30 


ADMINISTRATION  OF  A  BUDGET  SYSTEM 

services.  At  times  controversies  between  competing 
services  become  very  acute.  In  no  small  degree  the 
duplication  of  organization,  plant,  work,  and  overlap- 
ping of  functions  that  characterizes  the  administrative 
system  of  our  national  government  can  be  attributed  to 
this  fact. 

Not  the  first  step  towards  the  adoption  of  a  proper 
budgetary  system  can  be  made  until  this  principle  of 
actual  formulation  of  the  budget  by  the  Chief  Executive 
is  unequivocally  accepted.  It  is  one  thing,  however,  to 
adopt  a  principle  and  quite  another  to  devise  the  means 
through  which  this  principle  may  be  effectively  put  in 
practice.  It  remains  for  us  to  consider,  therefore,  the 
action  that  must  be  taken  if  this  principle  is  to  be  effec- 
tively applied. 

An  Integrated  Administrative  System  the  Essential 
Basis  of  a  Proper  Budget  System.  In  considering  this 
branch  of  our  study,  the  first  point  to  be  noted  is  that, 
if  the  vesting  of  responsibility  for  the  preparation 
of  a  budget  in  the  hands  of  the  Chief  Executive  is  to 
be  other  than  a  nominal  imposition  of  a  duty,  that  is, 
is  to  result  in  the  establishment  of  a  system  under  which 
the  budget  will  represent  a  carefully  worked-out  finan- 
cial and  work  program,  based  upon  a  real  knowledge  of 
governmental  conditions  and  needs,  the  Chief  Executive 
must  be  definitely  recognized  as  the  head  of  the  admin- 
istration. He  must  have  power  and  the  responsibility 
of  keeping  in  touch  currently  with  the  conduct  of  admin- 
istrative affairs  and  of  currently  exercising  that  general 
direction,  supervision  and  control  over  the  manner  in 
which  such  affairs  are  conducted  as  is  necessary  in  order 
to  assure  himself  that  the  public  business  is  being 
properly  performed. 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

The  Chief  Executive  can  be  put  in  this  position  only 
by  the  organization  of  the  administrative  services  of  the 
government  according  to  the  principle  of  what  is  known 
as  an  integrated  or  hierarchical  type  of  organization; 
that  is,  one  where  related  services  are  grouped  in  de- 
partments under  the  general  direction,  supervision  and 
control  of  the  Chief  Executive  and  the  line  of  adminis- 
trative authority  made  to  follow  this  gradation  of  units 
instead  of  running  directly  from  the  several  services  to 
the  legislatures. 

This  feature  of  the  problem  of  establishing  a  proper 
budgetary  system  cannot  be  too  strongly  stressed  since 
it  is  not  only  of  fundamental  importance  but  has  re- 
ceived far  too  little  attention  in  modern  efforts  for  the 
accomplishment  of  budgetary  reform.  In  these  efforts 
the  theory  has  been  tacitly,  if  not  avowedly,  proceeded 
upon  that  the  whole  duty  of  the  Chief  Executive  con- 
sisted in  reviewing  the  estimates  as  formulated  by  the 
spending  department  with  a  view  primarily  to  their  re- 
duction. The  tendency,  in  a  word,  has  been  to  view  the 
function  of  the  Chief  Executive  in  respect  to  the  formu- 
lation of  the  budget  too  largely  from  a  negative  stand- 
point. In  point  of  fact  the  formulation  of  the  budget 
by  the  Chief  Executive  should  be  an  affirmative  act  of 
the  highest  character.  What  is  wanted  is  not  a  mere 
criticism  of  departmental  estimates  but  a  positive,  con- 
structive work  program  emanating  from  a  responsible 
administrator  in  chief.  Such  a  program  cannot  be 
prepared  by  an  executive  who  stands,  as  it  were,  outside 
of  the  administration.  He  must  be  at  once,  not  only  a 
part  of  the  administration  but  the  real  directing  head. 
Furthermore,  it  must  be  apparent  that  unless  the  execu- 
tive budget  goes  forward  as  the  program  of  the  adminis- 
tration as  a  whole  and  not  merely  as  one  representing 

32 


ADMINISTRATION  OF  A  BUDGET  SYSTEM 

the  opinion  of  an  outside  officer,  it  will  fail  to  receive 
the  support  in  the  legislature  that  it  should.  That  body, 
with  considerable  show  of  reason,  will  inevitably  take 
the  position  that  it  is  as  competent  to  pass  upon  the 
estimates  of  the  departments  as  is  a  Chief  Executive 
having  little  or  no  administrative  authority  or  responsi- 
bility. 

The  Need  for  an  Organ  of  General  Administration.   The 

foregoing  must  make  clear  that  the  establishment  of 
a  proper  budgetary  system  means  much  more  than  the 
mere  adoption  of  the  use  of  a  particular  form  or  docu- 
ment for  getting  before  the  fund-raising  and  grant- 
ing authority  estimates  of  financial  needs.  It  means  the  f 
definite  establishment  of  a  centralized  or  integrated  sys- 
tem of  administration  with  the  Chief  Executive  at  its 
head.  This  carries  with  it  the  necessity  for  another 
action  to  which  it  is  now  desired  to  direct  attention. 

Manifestly,  if  the  Chief  Executive  is  properly  to  per- 
form his  function  of  administrator  in  chief,  he  must  be 
furnished  with  some  organ  through  which  he  may  effec- 
tively discharge  the  large  responsibilities  thus  thrown 
upon  him.  There  must  be  some  service  whose  duty  it  AI- 
is  to  prescribe  the  system  of  accounting  and  reporting  ' 
that  shall  be  employed  by  all  services  of  the  government, 
to  receive  the  reports  as  rendered,  compile  them  and 
analyze  their  contents  in  such  a  form  that  the  Chief 
Executive  can  currently  keep  in  touch  with  the  conduct 
of  administrative  affairs,  to  prescribe  the  manner  and 
form  in  which  estimates  shall  be  submitted  and  to  com- 
pile such  data  for  budgetary  purposes;  to  make  such 
investigation  into  the  manner  in  which  the  several  serv- 
ices are  organized,  the  methods  employed  by  them  and 
their  needs  as  will  enable  the  Chief  Executive  to  assure 

33 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

himself  that  such  services  are  properly  organized  and 
conducted  and  to  determine  for  himself  the  propriety 
of  their  demands;  and,  finally  to  take  all  steps  needed 
to  ensure  a  proper  standardization  of  personnel  and 
administrative  practices  without  which  due  economy  and 
efficiency  cannot  be  secured  nor,  what  is  of  immediate 
concern  here,  a  proper  budget  prepared. 

It  may  seem  at  first  sight  that  the  creation  of  such  an 
organ  does  not  raise  any  special  problem  of  organiza- 
tion. Examination,  however,  will  show  that  this  is  not 
the  case.  If  this  organ  is  properly  to  perform  the  duties 
it  must  have  a  status  and  powers  quite  distinct  from 
those  of  the  administrative  services,  properly  speaking. 
Its  position  and  powers  should  correspond  to  those  of 
the  Chief  Executive,  of  whom  it  is  the  instrument  or 
agent.  This  means  that  it  should  be  a  service,  not  only 
independent  of,  but  superior  in  authority  to,  the  serv- 
ices through  which  the  affairs  of  government  are 
actually  conducted. 

To  understand  the  necessity  for  this  it  is  necessary  to 
bear  in  mind  the  essential  difference  that  exists  between 
/the  operations  of  direction,  supervision  and  control,  on 
/the  one  hand,  and  of  execution  on  the  other.     It  is  the 
•<!  function  of  a  chief  executive  to  perform  the  first;  that 
'  of    administrative    departments,    the    second.      If    we 
analyze  the  character  of  work  that  falls  upon  a  service 
having  charge  of  the  formulation  of  a  budget,  it  will 
be  seen  that  it  corresponds  to  the  first  of  these  cate- 
gories.     The    administrative    services    proper    having 
charge,  as  they  do,  of  the  actual  performance  of  work 
naturally  desire  to  secure  all  the  funds  possible  for  the 
prosecution  of  their  particular  undertakings.    Their  in- 
terest is  in  their  several  services  rather  than  in  the  gov- 
ernment as  a  whole.    As  applicants  for  funds,  they  oc- 

34 


ADMINISTRATION  OF  A  BUDGET  SYSTEM 

cupy  a  position  antagonistic  to  the  interests  of  the 
general  treasury,  and  are  competitors  among  themselves 
in  the  allotment  of  available  funds.  If  their  demands 
are  to  be  kept  within  bounds,  conflicting  claims  adjusted, 
and  the  treasury  protected,  it  is  essential  that  there 
should  be  some  organ  having  an  authority  superior  to 
them,  and  itself  not  an  administrative  agent,  whose 
special  function  it  should  be  to  act  on  behalf  of  the 
government  as  a  whole  and  to  pass  upon  and  harmonize 
these  several  demands  and  conflicting  claims.  Such  an 
organ  can  be  provided  only  by  creating  an  independent 
service  and  placing  it  under  the  immediate  authority  and 
direction  of  the  Chief  Executive.  This  organ  should 
have  nothing  to  do  with  the  actual  performance  of  the 
work  of  the  government.  Its  sole  function  should  be  \  j 
that  of  formulating  and  prescribing  the  regulations  and 
instructions  necessary  to  ensuring  due  compliance  on  < 
the  part  of  the  spending  departments  with  all  budgetary 
requirements,  of  seeing  that  accounts  are  kept  and  re- 
ports rendered  in  proper  form,  of  issuing  the  call  for 
the  preparation  and  submission  of  the  annual  estimates 
and  reports,  of  passing  upon  the  demands  so  made,  of 
assembling  the  data  in  the  form  of  a  budget  and  sup- 
porting statements,  and  of  seeing  that  the  provisions  of 
the  appropriation  acts  as  finally  adopted  are  duly  en- 
forced. 

So  much  attention  would  not  have  been  given  to  this 
question  of  the  character  of  organ  that  should  be  pro- 
vided for  the  administration  of  a  budgetary  system  but 
for  the  fact  of  its  extreme  importance  and  the  further 
fact  that  no  service  at  all  corresponding  to  it  in  either 
status  or  power  is  to  be  found  in  the  government  of  the 
United  States  as  at  present  organized.  Yet,  if  the  gov- 

35 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

ernment  is  to  have  a  proper  budgetary  system,  provision 
must  be  made  for  an  organ  of  this  character. 

The  British  Treasury  as  an  Organ  of  General  Adminis- 
tration. This  fact  has  been  appreciated  and  acted 
upon  by  the  British  government.  In  its  Treasury,  pre- 
sided over  by  the  Chancellor  of  the  Exchequer,  this  gov- 
ernment has  an  organ  of  precisely  this  character.  This 
department,  notwithstanding  its  name,  has  nothing  to  do 
with  the  actual  administration  of  the  financial  affairs 
of  the  government;  all  that  work  is  done  by  the  so-called 
revenue  departments,  the  customs  and  excise  services, 
the  post  office,  the  commissioners  of  the  public  debt,  etc. 
Its  sole  functions  are  the  directing,  supervising,  and 
controlling  of  the  manner  in  which  work  is  done  by  these 
services  and  the  so-called  spending  departments  which 
are  charged  with  the  expenditure  of  the  funds  voted, 
and  preparing  the  budget  for  submission  to  Parliament. 
This  department  also  furnishes  the  organ  through  which 
flexibility  in  the  expenditure  of  appropriations  is  se- 
cured, as  upon  it  falls  the  duty  of  passing  upon  all  re- 
quests for  the  transfer  of  funds  from  one  appropriation 
head  to  another.  Finally,  it  acts  as  a  general  bureau 
of  administration  since  in  it  is  vested  large  authority  in 
respect  to  the  fixing  of  salaries,  the  purchase  of  supplies, 
the  furnishing  of  quarters,  and  other  elements  entering 
into  the  question  of  the  cost  and  efficiency  with  which 
governmental  operations  are  conducted.  This  is  a  phase 
of  its  duties  which  is  of  great  importance,  but  it  is  one 
the  consideration  of  which  would  lead  us  too  far  from 
the  particular  topic  which  we  now  have  under  consider- 
ation.1 

1  For  a  detailed  description  of  this  system  see  "The   System  of 
Financial  Administration  of  Great  Britain,"  by  W.  F.  Willoughby,  W. 

36 


ADMINISTRATION  OF  A  BUDGET  SYSTEM 

Though  the  British  Treasury  offers  the  best  example 
of  a  service  of  general  overhead  administration  pos- 
sessed by  any  government,  certain  of  our  states  have 
created  excellent  organs  of  this  character.  Reference 
is  made  specially  to  the  California  State  Board  of  Con- 
trol established  in  1911,  the  Wisconsin  State  Board  of 
Public  Affairs  established  in  1913,  and  the  Illinois  De- 
partment of  Finance  established  in  191 7.* 

W.  Willoughby  and  S.  M.  Lindsay.  Studies  in  Administration:  In- 
stitute for  Government  Research.  D.  Appleton  &  Co.,  New  York, 
1917. 

1  For  an  account  of  the  organization,  powers  and  work  of  these 
bodies,  see  "The  Movement  for  Budgetary  Reform  in  the  States," 
Studies  in  Administration,  Institute  for  Government  Research,  1918. 


CHAPTER' 
LEGISLATIVE  ACTION  UPON  A  BUDGET 

In  the  preceding  chapters  we  have  considered  the 
nature  and  functions  of  a  budget,  and  the  means  through 
which  such  a  document  should  be  compiled.  We  turn 
now  to  a  consideration  of  the  manner  in  which,  upon 
the  basis  of  the  information  contained  in  this  document, 
the  resulting  appropriation  act  shall  be  enacted. 

Legislative  Modification  of  Budget  Proposals.  The  po- 
sition was  taken  in  the  preceding  chapter  that  the  legis- 
lature should  exercise  no  power  of  initiating  budget 
proposals.  It  is  believed  that  the  correctness  of  that 
position  is  not  open  to  serious  question.  When  we  turn, 
however,  to  the  question  of  the  extent  to  which  the  legis- 
lature should  have  power  to  modify  budget  proposals 
initiated  by  the  executive,  we  are  confronted  with  a 
problem  regarding  which  opinion  and  practice  on  the 
part  of  existing  governments  are  widely  divergent. 

So  accustomed  is  the  American  public  to  the  theory 
and  practice  that  the  voting  of  appropriations  is  exclu- 
sively a  legislative  function,  that  it  becomes  exceedingly 
difficult  not  merely  to  secure  a  consideration  of  this  issue 
purely  upon  its  intrinsic  merits,  but  even  to  effect  a  reali- 
zation that  the  issue  exists  at  all.  The  idea  that  the 
legislature  is  the  organ  which  should  determine  how  the 
public  moneys  shall  be  spent  is  so  thoroughly  ingrained 
in  American  political  thinking  that  it  is  almost  impos- 

38 


LEGISLATIVE  ACTION  UPON  A  BUDGET 

sible  for  the  ordinary  citizen  to  conceive  of  this  power 
being  vested  elsewhere.  Foreign  as  is  the  idea  to  the 
American  public,  however,  there  are  cogent  grounds 
for  holding  that  the  legislature  should  be  largely,  if  not 
wholly,  excluded  from  the  direct  determination  of  the 
appropriation  of  funds. 

Strictly  speaking,  an  appropriation  act  is  not  a  law. 
Laws,  from  the  juristic  standpoint,  have  to  do  with 
rights,  duties,  and  remedies  and  the  manner  of  their 
enforcement.  They  are  general  and  permanent  in  char- 
acter. Appropriation  acts,  in  common  with  all  other 
enactments  having  for  their  purpose  the  giving  of  direc- 
tions to  officers  of  the  government,  are,  for  the  most 
part,  but  administrative  orders.  For  the  most  part  they 
have  only  a  temporary  end  in  view.  The  establishment 
of  a  practice  under  which  the  legislative  branch  refrains 
from  making  any  material  change  in  budgetary  pro- 
posals as  they  emanate  from  the  executive  does  not 
therefore  mean  any  curtailment  of  the  law-making  pow- 
ers, properly  speaking,  of  that  body.  The  primary  func- 
tions of  a  legislature  are  those  of  determining  the  laws 
under  which  the  people  shall  live  and  of  serving  as  an 
organ  of  popular  opinion  in  respect  to  matters  political. 
It  is  not  necessarily  one  of  its  functions  to  act  as  a  board 
of  directors  for  the  determination  of  the  details  of  ad- 
ministrative action.  The  vesting  of  responsibility  for 
appropriations  in  the  executive  thus  means  making  more 
definite  the  separation  of  power  which  is  supposed  to 
constitute  one  of  the  fundamental  principles  of  our  po- 
litical system. 

Indeed  the  exercise  by  members  of  the  legislature  of 
the  right  to  modify  budgetary  proposals  in  any  material 
way  results  in  the  destruction  of  the  whole  theory  upon 
which  a  budgetary  system  rests.  It  is  of  the  essence  of 

39 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

that  system  that  the  total  revenue  and  expenditure  needs 
of  a  government  shall  be  considered  and  determined 
upon  at  one  and  the  same  time  and  that  the  two  sides 
of  the  account  shall  be  considered  in  their  relations  to 
each  other.  In  this  way  only  can  a  proper  budgetary 
balance  be  established,  the  public  credit  protected,  and 
proper  action  be  had  in  relation  to  the  larger  problems 
of  national  finance.  The  difficulties  involved  in  secur- 
ing well  considered  action  of  this  kind  through  the 
customary  processes  of  legislation  are  manifold. 

After  all,  however,  the  great  argument  in  favor  of  an 
executive  determination  of  appropriations  lies  in  the 
excellent  results  obtained  wherever  that  system  has  been 
practiced  when  compared  with  those  secured  under  a 
system  of  legislative  determination.  Extravagance, 
waste,  and  misapplication  of  public  funds  have  inva- 
riably resulted  where  the  legislative  branch  has  been 
given  the  determining  voice  in  the  enactment  of  budg- 
etary proposals.  Of  this,  the  United  States  and  France 
furnish  the  leading  illustrations.  In  both  countries  the 
extent  to  which  appropriations  are  made  for  purposes 
not  corresponding  to  national  needs,  and  representing 
gross  waste  of  the  public  funds,  amounts  to  a  national 
scandal.  In  this  country  millions  of  dollars  are  annually 
wasted  in  maintaining  useless  army  posts,  navy  yards 
and  other  local  stations.  Other  millions  are  similarly 
wasted  in  the  erection  of  public  buildings  and  the  execu- 
tion of  public  works  which  are  useless  or  at  least  have 
no  utility  commensurate  with  the  expenditures  involved 
in  their  construction  and  subsequent  maintenance.  The 
direct  money  loss  thus  resulting  is,  moreover,  but  a  part 
of  the  damage  done.  The  location  of  the  stations  and 
plants  at  unsuitable  points  makes  it  impossible  to  secure 
an  efficient  administration  of  the  services  to  which  they 

40 


LEGISLATIVE  ACTION  UPON  A  BUDGET 

belong.  The  result  is  to  discourage  economy  on  the  part 
of  those  intrusted  with  the  administration  of  these 
services  and  to  lower  the  whole  tone  of  public  adminis- 
tration. In  France,  conditions  in  normal  times  are 
scarcely,  if  any,  better. 

If  we  turn  from  these  two  countries  to  Great  Britain, 
we  find  quite  a  different  condition  of  affairs.  There  the  I 
principle  is  firmly  established  that  the  Ministry,  that  is, 
the  Executive,  not  only  formulates  the  budget  but  deter- 
mines what  appropriations  shall  be  made  in  conformity 
with  it.  Parliament,  though  legally  possessing  the 
power,  has  voluntarily  enacted  rules  under  which  it  has 
deprived  itself  of  the  right  to  modify  the  expenditure 
proposals  made  by  the  Ministry,  except  in  so  far  as  such 
modifications  are  formally  accepted  by  the  latter.  The 
result  of  this  practice  is  that  appropriations  are  rarely, 
if  ever,  made  with  a  view  to  anything  but  the  needs  of 
the  country  as  a  whole. 

The  explanation  of  the  difference  in  the  results  ob- 
tained under  the  two  systems  lies  in  the  fact  that,  in  the 
latter  case,  the  authority  determining  appropriations,  ! 
the  Ministry,  represents  the  country  as  a  whole.  In  the 
former,  the  determining  authorities,  the  members  of  the 
legislature,  represent  particular  districts  and  their  in- 
terests are  in  those  districts  rather  than  in  the  entire 
country.  Theoretically,  it  would  seem  difficult  for  a 
member  to  secure  action  favoring  his  district  at  the  ex- 
pense of  the  general  welfare.  Actually,  however,  this 
difficulty  is  easily  overcome  through  the  vicious  practice 
known  as  "log-rolling"  under  which  members  agree  to 
support  the  proposals  of  their  colleagues  in  return  for 
the  latter's  support  of  their  own  measures.  The  secret 
of  the  whole  matter  thus  lies  in  definitely  locating  power 
and  responsibility  over  appropriations  in  that  organ 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

which   represents   the   whole   country   and   is   directly 
responsible  for  the  conduct  of  public  affairs. 

It  need  hardly  be  pointed  out  that  the  abdication  by 
the  legislature  of  its  power  to  modify  the  budget  pro- 
posals of  the  executive  is  more  consonant  with  the 
genius  of  a  responsible  government  than  with  that  of 
our  own.  There  the  legislature  abandons  merely  the 
exercise  of  a  specific  power,  but  retains  its  complete 
control  over  the  agents  in  whose  favor  it  yields.  Never- 
theless, even  under  the  American  system  of  government, 
the  relinquishment  by  the  legislature,  in  whole  or  in 
major  part,  of  the  power  of  modifying  budget  proposals 
does  not  necessarily  mean  the  elimination  of  the  legisla- 
ture as  a  factor  in  the  determination  of  final  action.  It 
can  and  should  still  exercise  a  powerful  moral  check 
upon  the  executive.  To  this  end  it  must  be  provided 
that  the  executive  shall  exercise  the  appropriation  power 
only  in  and  through  the  legislature  and  that  no  action 
can  be  taken  by  him  until  he  has  laid  its  proposal  before 
that  body  and,  through  it,  before  the  country,  and  has 
given  to  it  a  full  opportunity  to  discuss  and  criticize  it. 
The  executive  is  thus  placed  in  the  position  where  he 
must  justify  and  defend  his  proposals.  Manifestly  this 
requirement  imposes  not  only  a  strong  moral  check 
upon  the  executive,  but  ensures*  that,'  as  far  as  possible, 
he  will  seek  to  make  his  proposals  such  as  commend 
themselves  to  the  legislature  and  to  the  country  as  a 
whole. 

It  is  not  of  course  intended,  in  the  foregoing,  to  frame 
a  practical  proposal  applicable  to  the  current  situation 
in  this  country,  but  rather  to  lay  a  foundation  in  theory 
upon  which  a  workable  plan  of  reform  may  be  reared. 
Whatever  may  be  the  theoretical  correctness  of  a  com- 
plete concentration  of  appropriating  power  in  the  hands 

42 


LEGISLATIVE  ACTION  UPON  A  BUDGET 

of  the  executive,  it  is  of  course  clear  that  the  complete 
relinquishment  by  the  legislature  of  the  power  of  modi- 
fying budget  proposals  belongs  in  the  realm  of  the 
future.1  The  practical  issue  is  one,  not  of  the  elimina- 
tion of  legislative  determination  of  appropriations,  but 
merely  of  its  restriction  to  such  large  questions  of  ap- 
propriation only  as  can  in  any  sense  be  regarded  as 
legislative.  We  enter  here  upon  a  root  problem,  the 
very  existence  of  which  has  as  yet  been  scarcely  recog- 
nized in  our  budgetary  practice. 

Distinction  between  a  Budget  and  an  Appropriation  Act. 

To  no  small  degree  the  neglect  of  this  problem  is 
attributable  to  the  failure  to  recognize  the  basic  dif- 
ference between  a  budget  and  an  act  of  appropriation. 
Patent  as  is  this  distinction,  it  is  one  which  is  too  often 
lost  sight  of  in  the  discussion  of  financial  policies  and 
procedure.  One  thus  often  hears  the  expression  "pass- 
ing or  enacting  the  budget/'  as  if  the  budget  were  both 

1  In  this  statement  special  reference  is  made  to  the  national  gov- 
ernment. Notwithstanding  the  radical  character  of  the  change  it  is 
highly  significant  that  certain  of  the  states  have  taken  this  action.  By 
an  amendment  to  its  constitution  adopted  in  1916,  Maryland  has  pro- 
vided that  the  Governor  shall  submit  both  a  budget  and  a  budget  bill 
covering  all  the  expenditures  of  the  government  for  the  ensuing  bien- 
nial period;  that  the  legislature,  though  having  the  power  to  diminish 
or  eliminate  any  items  In  it  providing  for  the  administrative  services 
and  work  of  the  government  shall  not  have  the  power  to  increase 
them;  that  no  other  bill  carrying  an  appropriation,  or  of  a  character 
calling  for  an  appropriation  to  give  effect  to  its  provisions,  shall  be 
considered  until  final  action  has  been  had  upon  the  budget  bill  in 
both  houses;  and  that  any  such  other  appropriation  bill  shall  relate 
to  but  a  single  object  or  purpose,  shall  not  become  a  law  unless  it 
receives  the  vote  of  a  majority  in  each  house  of  all  the  members 
elected  to  it,  and  shall  provide  for  a  special  tax  for  the  raising  of 
the  revenue  required  to  meet  the  appropriation.  Two  other  states, 
New  Mexico  and-  Utah,  have  adopted  substantially  the  same  system 
by  statutes  enacted  in  1917.  Should  any  considerable  number  of 
other  states  follow  the  example  of  these  states  it  is  well  within  the 
realm  of  possibilities  that  the  Congress  of  the  United  States  may  be 
induced  to  do  the  same. 

43 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

in  character  and  in  form  a  legislative  bill.  This  loose 
use  of  language  is  from  every  standpoint  to  be  regretted. 
Not  only  does  it  tend  to  obscure  the  fact  that  the  formu- 
lation of  a  budget  and  the  enactment  of  revenue  and 
appropriation  acts  are  distinct  operations,  but  it  ignores 
the  essential  differences  in  the  character  of  the  problems 
that  the  two  present.  This  difference  is  one  which  we 
desire  now  to  examine  with  great  care,  for  in  it  is  in- 
volved one  of  the  most  difficult  and  vital  features  of  the 
whole  scheme  of  financial  practice  and  procedure. 

A  budget  is,  as  we  have  repeatedly  had  occasion  to 
point  out,  essentially  an  information  document.  As 
such  it  is  desirable  that  it  should  present  as  detailed  an 
exposition  of  the  revenues  and  expenditures  of  the  gov- 
ernment, past  and  prospective,  as  it  is  feasible  to  pre- 
pare. It  should  furnish  not  only  information  regarding 
the  general  character,  purpose,  and  amount  of  govern- 
ment expenditures,  but  detailed  data  regarding  the  cost 
entailed  in  maintaining  particular  units  of  organization 
and  in  performing  the  particular  activities  itemized. 

An  appropriation  act  has  as  its  purpose  not  only  to 
authorize  the  issue  of  money  from  the  treasury  to  meet 
expenditures,  but  to  prescribe  the  manner  in  which  such 
money  shall  be  expended.  It  is  evident  that  the  accom- 
plishment of  this  second  purpose  raises  a  question  which 
is  not  present  in  the  formulation  of  a  budget;  that, 
namely,  of  the  extent  to  which  it  is  feasible  and  desirable 
to  attempt  to  prescribe  rigidly  in  advance  how  the  money 
appropriated  shall  be  expended.  A  moment's  reflection 
must  show  that  it  would  be  both  undesirable  and  im- 
practicable to  attempt  to  carry  this  specification  of  how 
money  voted  shall  be  expended  to  anything  like  the  de- 
tail in  which  expenditures  and  estimates  are  set  forth 
in  the  budget.  To  do  so  would  result  in  tying  the  hands 

44 


LEGISLATIVE  ACTION  UPON  A  BUDGET 

of  administrative  officers  to  such  an  extent  that  it  would 
be  impossible  for  them  to  perform  their  duties  properly 
and  efficiently.  It  is  impossible  to  foresee  all  contin- 
gencies, or  to  calculate  in  advance  precise  costs.  It  is 
imperative,  therefore,  that  the  money  voted  for  the  sup- 
port of  the  government  shall  be  so  appropriated  as  to 
permit  of  a  reasonable  degree  of  flexibility  in  its  ex- 
penditure.1 

Lump-Sum  versus  Itemized  Appropriations.  In  seeking 
to  meet  this  requirement  the  appropriating  authority 
is  between  two  dilemmas.  If  it  makes  its  specifica- 
tion in  too  great  detail,  it  is  not  only  certain  that 
this  specification  will  not  conform  to  actual  require- 
ments due  to  contingencies  which  it  is  impossible  to 
foresee,  but  that  the  expending  authorities  will  be  pre- 
vented from  exercising  that  discretion  which  is  essential 
if  an  efficient  administration  of  public  affairs  is  to  be  had. 
If,  on  the  other  hand,  it  makes  its  appropriation  in  too 
general  terms  it  not  only  fails  to  make  clear  and  definite 
its  will  regarding  how  the  public  moneys  shall  be  ex- 
pended, but  fails  to  establish  that  control  over  adminis- 
trative acts  which  is  desirable,  and  opens  the  door  to 
administrative  abuses  that  may  be  serious. 

The  writer  knows  of  no  place  where  the  issue  here 
presented  is  more  clearly  stated,  or  the  importance  of 
reaching  a  proper  solution  of  it  more  strongly  urged, 
than  in  the  paper  by  W.  O.  Heffernan,  Ex-Budget 
Commissioner  of  Ohio,  on  "State  Budget  Making  in 

*It  is  a  matter  of  congratulation  that  most  of  the  states  which 
have  in  recent  years  passed  acts  providing  for  the  adoption  of  a 
budgetary  system  have  recognized  this  distinction.  In  a  considerable 
number  of  cases  the  provision  is  made  that  the  Governor  shall  submit 
with  his  budget  a  draft  "budget  bill."  See  "The  Movement  for  Budg- 
etary Reform  in  the  States,"  Studies  in  Administration,  Institute  for 
Government  Research,  1918. 

45 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

Ohio."  1  After  commenting  in  general  terms  upon  the 
appropriation  system  of  the  state  before  the  adoption 
of  the  budgetary  system  in  1913,  he  said: 

All  of  the  house  appropriations  were  made  in  two 
ways,  either  in  lump  or  inflexible  specific  appropriations. 
The  lump  sum  scheme  seems  to  have  predominated  in 
appropriations  during  the  last  decade,  though  many  ex- 
amples of  specific  appropriations  occurred  during  this 
period.  A  thoroughly  efficient  and  honest  administra- 
tive official  can  oftentimes  get  better  results  if  he  has  a 
free  hand  in  the  use  of  funds,  and  circumstances  some- 
times arise  which  make  it  desirable  to  use  funds  for 
purposes  which  the  legislature  could  not  foresee.  But, 
on  the  other  hand,  the  same  kind  of  an  appropriation  in 
the  hands  of  dishonest  or  incompetent  officials  are  so 
easily  misused  that  they  have  proven  generally  unsatis- 
factory and  often  vicious.  Specific  appropriations  were 
the  natural  ends  towards  which  legislative  bodies  re- 
acted after  having  found  lump  sums  inadequate.  The 
fact  that  the  money  appropriated  specifically  could  be 
used  for  no  other  purposes  and  no  other  money  was 
available,  made  it  necessary  to  allow  a  wide  margin  for 
any  contingency  that  might  arise.  Usually  the  maxi- 
mum amounts  provided  for  were  not  required,  but  the 
official  thinking  that  he  must  allow  the  money  to  lapse 
or  spend  it  for  the  purposes  as  specified,  was  apt  to  be 
too  free  in  spending. 

Not  until  the  budget  was  established  in  1914  was  any 
attempt  made  to  combine  the  virtues  of  the  two  systems 
and  eliminate  their  vices.     In  order  to  avoid  the  evils 
of  both  lump  sum  and  specific  appropriations,  appropri- 
ations were  made  specifically  but  were  provided  with 
.the  necessary  degree  of  flexibility.    This  was  done  by 
\  means  of  the  transfer  system  which  made  it  possible  to 
appropriate,    instead    of    maximum    estimates,    those 
slightly  above  the  minimum.     Provided  with  the  privi- 

1  Public  Budgets,  Annals  of  the  American  Academy  of  Political 
and  Social  Science,  November,  1915,  pp.  94~95- 


LEGISLATIVE  ACTION  UPON  A  BUDGET 

lege  of  transfer,  departmental  officials  could  reduce  their 
estimates  on  each  item,  knowing  that  according  to  the 
"law  of  probability"  all  projects  would  not  cost  the  maxi- 
mum, and  that  the  small  margin  of  safety  could  be  trans- 
ferred from  those  which  cost  the  minimum  to  the  few 
that  actually  approach  the  maximum.  The  result  of  fol- 
lowing this  plan  was  economy  and  smaller  appropria- 
tions for  specific  items,  and  in  consequence  a  smaller 
budget.  Along  with  this  a  check  was  provided  on  ex- 
penditures for  the  reason  that  the  request  for  a  transfer 
invited  investigation  by  the  emergency  board,  and  re- 
quired a  statement  of  explicit  reasons  why  the  fund  to 
which  transfer  was  sought  was  not  adequate. 

There  are  three  ways  in  which  these  conflicting  con- 
siderations may  be  met.  One  is  by  the  installation  of 
a  system  of  accounting  and  reporting  which,  through 
the  use  of  a  budget,  will  give  to  the  legislature  precise 
information  as  to  how  money  voted  in  the  past  has  been 
expended.  This  may  seem  to  be  an  attempt  to  control 
after  the  act.  So  it  is  as  regards  the  expenditures 
covered  by  the  returns.  But  these  returns  furnish  the 
basis  for  determining  what  provision  shall  be  made  for 
future  needs.  It  must  be  evident  that  a  legislature  will 
be  far  more  disposed  to  vote  money  under  general  heads, 
thus  allowing  a  considerable  range  in  the  discretionary 
power  of  the  spending  officer,  if  it  knows  that  such  offi- 
cer will  be  compelled  to  render  to  it  a  detailed  account- 
ing of  the  manner  in  which  he  has  exercised  his  discre- 
tion than  if  the  contrary  is  the  case.  It  is  also  evident 
that  the  fact  that  he  must  render  such  a  detailed  ac- 
counting will  constitute  a  strong  moral  check  upon  the 
spending  officer  abusing  the  authority  vested  in  him. 
It  may  safely  be  said,  therefore,  that  the  mere  fact  of 
the  introduction  of  a  proper  budgetary  system,  based 
upon  a  scientific  system  of  accounts  and  reports,  will  in 

47 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

itself  make  possible  the  voting  of  funds  with  less  par- 
ticularity than  is  now  usually  the  case  and  at  the  same 
time  provide  safeguards  against  abuse  in  the  expendi- 
ture of  funds. 

Though  the  introduction  of  a  budget  system  will  thus 
tend  to  lessen  the  problem  of  harmonizing  legislative 
control  with  executive  discretion  it  will  not  solve  that 
problem.  This  can  be  secured  only  by  the  adoption  of 
one  or  the  other  or  both  of  two  devices.  The  first  of 
•  these  is  that  of  permitting  transfers  between  appropria- 
tion heads  or  subheads  such  as  we  have  just  seen  is  em- 
1  ployed  by  Ohio;  the  second,  that  whereby  money  is 
appropriated  under  general  heads  and  subsequently 
more  specifically  allotted  by  the  administrative  officers 
having  its  expenditure. 

The  System  of  Transfers  between  Appropriation  Heads. 
The  best  example  of  an  appropriation  system  mak- 
ing large  use  of  the  principle  of  transfers  between 
appropriation  heads  is  that  of  Great  Britain.1  In  this 
system  a  clear  distinction  is  drawn  between  appropria- 
tion heads  proper  or -"votes,"  subheads,  or  "appropria- 
tion accounts/'  and  items  under  the  subheads,  in  respect 
to  the  extent  to  which  the  sums  carried  must  be  rigidly 
devoted  to  the  service  or  purpose  indicated.  An  appro- 
priation proper,  which  is  technically  known  as  a  "vote," 
consists  of  the  total  sum  appropriated  for  some  impor- 
tant branch  of  the  government  service  or  category  of 
work.  In  the  civil  branches  of  the  government  the 
assignment  of  funds  so  made  is  final  and  cannot  be 
departed  from  unless  the  approval  of  Parliament  is  first 

1 A  fuller  account  of  the  English  system  is  to  be  found  in  "The  Sys- 
tem of  Financial  Administration  of  Great  Britain,"  prepared  by  the 
writer  in  collaboration  with  W.  W.  Willoughby  and  S.  M.  Lindsay 
for  the  Institute  for  Government  Research. 

48 


LEGISLATIVE  ACTION  UPON  A  BUDGET 

obtained.  In  the  military  and  naval  branches,  however, 
transfers  from  one  "vote"  to  another  within  the  same 
department  may  be  effected  upon  the  approval  of  the 
Treasury  being  received.  It  is  clearly  recognized,  how- 
ever, that  resort  to  this  power  should  not  be  had  except 
for  the  purpose  of  meeting  emergencies,  and  all  changes 
that  are  made  must  be  specially  reported  to  Parliament 
for  its  formal  approval. 

The  total  carried  by  each  "vote"  is  itemized  under 
headings  known  as  Appropriation  Accounts  to  indicate 
the  sums  assigned  to  subdivisions  of  the  services  to 
which  the  vote  relates  or  to  special  categories  of  ex- 
penditures. In  respect  to  these,  the  law  authorizes 
transfers  to  be  made  from  one  to  the  other  within  the 
same  vote  upon  the  approval  of  the  Treasury  being 
obtained.  The  law,  however,  requires  that  the  account, 
audit  and  report  of  expenditures  shall  be  made  accord- 
ing to  these  subheads,  so  that  Parliament  may  be  placed 
in  possession  of  full  information  regarding  the  extent 
to  which  this  faculty  of  "virement,"  as  it  is  called,  is 
used.  A  double  check  thus  exists  upon  an  improper 
use  or  abuse  of  this  power — the  requirement  that  the 
approval  of  the  Treasury,  an  organ  whose  primary 
function  is  the  protection  of  the  public  treasury,  must 
be  obtained,  and  the  necessity  for  reporting  all  such 
action  to  Parliament. 

The  sums  appropriated  under  the  several  "appropria- 
tion accounts"  are  not  further  itemized  in  the  appro- 
priation act.  It  should  be  noted,  however,  that  in  the 
estimates  such  a  further  itemization  is  presented  to- 
gether with  a  similar  itemization  of  the  manner  in  which 
the  sums,  if  any,  voted  for  the  corresponding  subheads 
were  expended  in  the  preceding  year.  Parliament  can 
thus  see  the  extent  to  which  past  practice  has  been  de- 

49 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

parted  from  in  the  estimates  for  the  year  in  question. 
There  can  be  no  question  about  the  effectiveness  of 
this  system.  It  should  be  noted,  however,  that  its  suc- 
cessful working  depends  upon  two  things:  One,  the 
existence  of  a  strong  independent  organ  whose  func- 
tion it  is  to  see  that  the  faculty  of  making  transfers  is 
not  abused;  and  the  other,  the  requirement  that  a  de- 
tailed account  of  expenditures  and  of  all  transfers  shall 
be  kept  and  reported  to  Parliament  for  its  information. 
Without  these  two  requirements  it  is  certain  that  the 
whole  system  would  break  down.1 
The  Allotment  System.  The  allotment  system,  which  is 
more  fully  described  in  a  subsequent  chapter,  is,  as 
there  urged  for  adoption  by  the  United  States,  that 
appropriations  should  be  made  under  a  relatively  few 
heads  corresponding  to  the  main  divisions  of  govern- 
ment, that  is,  the  departments  and  their  distinct  serv- 
ices; that,  immediately  upon  the  passage ;  of  the  appro- 

1  It  is  a  matter  of  no  little  interest  to  note  that  this  important  fea- 
ture of  the  English  budgetary  system  has  been  adopted  by  the  gov- 
ernment of  Porto  Rico.  Under  its  budgetary  system  economies  ef- 
fected in  the  expenditure  of  appropriations  for  subheads  are  avail- 
able for  transfers  to  other  subheads  within  the  same  department  upon 
the  approval  being  obtained  of  the  Executive  Council,  the  latter  body 
thus  performing,  in  this  respect,  the  function  of  the  Treasury  in  the 
governmental  system  of  Great  Britain.  The  writer,  who  served  for 
six  years  as  Treasurer  of  the  Island  and  as  a  member  of  the  Exec- 
utive Council,  can  bear  witness  to  the  excellent  results  flowing  from 
this  system.  The  system  under  which  transfers  may  be  made  from 
one  appropriation  head  to  another  upon  the  approval  of  some  author- 
ity being  had  has  also  been  adopted  by  certain  of  the  states.  The 
New  Jersey  budget  act  of  1916  thus  provides  that  "in  order  that  some 
degree  of  flexibility  in  appropriations  may  be  had,  any  department  or 
other  state  agency  receiving  an  appropriation  by  any  future  act  of  the 
legislature  may  apply  to  the  State  House  Commission  for  leave  to 
transfer  a  part  of  any  item  granted  to  such  department  or  agency  to 
any  other  item  in  such  appropriation."  The  Tennessee  budget  act  of 
1917  contains  a  similar  provision,  the  approving  authority  here  being 
the  State  Budget  Commission.  Substantially  the  same  system  has, 
as  we  have  seen,  been  employed  by  Ohio  since  1914.  See  "The  Move- 
ment for  Budgetary  Reform  in  the  States,"  Studies  in  Administration, 
Institute  for  Government  Research,  1918. 

So      • 


LEGISLATIVE  ACTION  UPON  A  BUDGET 

priation  acts  and  before  the  beginning  of  the  year  to 
which  they  relate,  the  departments  and  bureaus  proceed 
to  make  an  allotment  of  these  lump  sums  to  specific 
subdivisions  of  the  services  to  which  they  relate  or  to 
particular  categories  of  work  or  expenditures;  that  each 
subdivision  to  which  a  specific  allotment  has  been  made 
in  turn  make  a  further  allotment  of  the  sum  granted  to 
it;  that  these  allotments  in  all  cases  be  formally  made 
in  writing,  with  the  result  that  if  these  several  allot- 
ments are  assembled,  there  will  be  brought  into  exist- 
ence an  appropriation  document  differing  in  no  essen- 
tial feature  from,  and  representing  as  detailed  an  as- 
signment of  funds  as  that  made  by  an  appropriation  act 
made  by  Congress;  that  allotment  accounts  be  opened 
up  in  the  accounting  offices  of  the  services  and  de- 
partments, and,  as  far  as  may  be  deemed  desirable, 
in  the  accounting  offices  of  the  Treasury  Department, 
corresponding  to  the  appropriation  accounts  now  main- 
tained by  the  latter  department;  that  changes  in  the 
allotment  of  funds  as  thus  made  be  made  only  by  formal 
action  in  writing  on  the  part  of  the  allotting  authority; 
that  the  financial  reports  of  the  several  services  clearly 
set  forth  the  allotment  scheme  as  originally  established, 
all  changes  subsequently  authorized,  and  the  expendi- 
tures actually  made  under  each  allotment  head;  and, 
finally,  that  a  consolidated  report  of  expenditures  of  the 
government  be  made  to  Congress  in  accordance  with 
this  scheme  of  accounts.1 

1  At  least  one  state,  Minnesota,  has  adopted  substantially  this  sys- 
tem. Its  budget  act,  passed  in  1915,  thus  provides  that:  "It  shall 
be  the  duty  of  each  disbursing  officer  or  board,  within  thirty  days 
after  the  passage  of  any  appropriation  by  the  state  legislature  to  al- 
lot within  each  appropriation  to  be  expended  under  his  or  its  direc- 
tion the  amounts,  if  any,  for  the  several  purposes  set  forth  in  the 
'budget'  submitted  to  the  legislature,  not  inconsistent  with  the  terms 
of  the  appropriation  act.  Subject  to  the  restrictions  of  the  appropri- 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

The  writer  is  aware  that  this  scheme  does  not  possess 
the  same  degree  of  control  that  is  present  in  the  Eng- 
lish system,  due  to  the  existence  in  the  latter  of  the 
requirement  that  the  approval  of  an  organ  independent 
of  the  spending  department  must  be  had  as  to  important 
changes  in  the  assignment  of  funds  as  first  made.  Until 
Congress  is  willing  to  erect  the  Treasury  Department 
into  such  an  organ  or  to  create  an  organ  having  that 
special  function  this  defect  cannot  be  remedied. 

Under  this  scheme  responsibility  for  the  allotment  of 
funds  is  not  only  definitely  located  but  located  in  that 
authority  which  is  best  qualified  to  perform  it.  Further- 
more, the  approval  of  a  superior  authority  to  all  changes 
in  sub-allotments,  as  originally  made  and  approved, 
must  always  be  had.  Finally,  the  requirement  that  the 
making  of  allotments  and  of  changes  in  allotments  shall 
be  a  formal  act,  that  accounts  shall  be  kept  so  as  to 
show  all  allotment  transactions,  and  that  full  report 
shall  be  made  to  Congress,  establishes  the  maximum  of 
control  consistent  with  flexibility  in  the  expenditure  of 
funds  that  it  is  possible  to  secure  under  our  govern- 
mental system  as  at  present  organized. 

Present  System  of  Itemizing  Appropriations  of  the  Na- 
tional Government.  Certainly  this  system  would  offer 
a  great  improvement  over  present  practices.  As  con- 
ditions are  at  present,  Congress  has  worked  out  no 
consistent  system  for  meeting  this  vital  feature  of  a 
proper  budgetary  system.  In  general,  it  may  be  said 
that  it  pursues  the  policy  of  attempting  to  specify  in  the 

ation  act,  allotments  may,  in  case  of  necessity,  be  altered  by  the 
officer  or  board  charged  with  the  disbursement  thereof.  All  such  al- 
lotments and  any  changes  thereof  shall,  as  soon  as  made,  be  filed  with 
the  State  Auditor."  See  "The  Movement  for  Budgetary  Reform  in 
the  States,"  Studies  in  Administration,  Institute  for  Government  Re- 
search, 1918. 

52 


LEGISLATIVE  ACTION  UPON  A  BUDGET 

greatest  possible  detail  the  manner  in  which  the  money 
voted  for  the  support  of  the  government  shall  be  spent, 
and  in  doing  so  makes  no  distinction  between  appropria- 
tion heads  and  subheads.  Only  in  isolated  cases  has  it 
made  what  are  known  as  "lump-sum  appropriations," 
which-  are  subject  to  administrative  allotment,  and, 
when  it  has  done  so,  it  has  established  none  of  the  safe- 
guards which  should  be  thrown  around  this  grant  of 
power.  In  only  a  few  cases,  also,  as  in  the  appropria- 
tion acts  for  the  Department  of  Agriculture,  the  Coast 
and  Geodetic  Survey  and  the  construction  of  the  Pan- 
ama Canal,  has  it  provided  for  making  transfers  from 
one  subhead  of  an  appropriation  to  another.  The  act 
for  the  first  of  these  departments  contains  the  unusual 
provision  that  "not  to  exceed  ten  per  centum  of  the 
foregoing  amounts  for  the  miscellaneous  expenses  of 
the  work  of  any  bureau,  division  or  office  herein  pro- 
vided shall  be  available  interchangeably  for  expenditure 
on  the  objects  included  within  the  general  expenses  of 
such  bureau,  division  or  office;  but  not  more  than  ten 
per  centum  shall  be  added  to  any  one  item  of  appropria- 
tions except  in  cases  of  extraordinary  emergency  and 
then  only  upon  the  written  order  of  the  Secretary  of 
Agriculture."  It  will  thus  be  seen  that  in  the  few  cases 
where  this  right  of  transfer  is  recognized  it  is  confined 
to  a  few  items  and  restricted  within  very  narrow  limits. 
The  only  other  device  made  use  of  by  the  United  States 
government  is  that  of  giving  to  the  several  services 
small  contingent  funds  which  are  available  for  so-called 
miscellaneous  expenses  but  not  for  increasing  the 
amounts  assigned  to  specific  items. 

One  of  the  results  of  this  failure  to  give  flexibility  to' 
its  appropriation  system  is  the  extent  to  which  resort 
has  to  be  had  to  deficiency  appropriation  acts.  An  in- 

53 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

adequacy  in  the  amounts  voted  for  particular  purposes 
\  is  met  by  an  additional  grant  of  funds,  instead  of  by  a 
transfer  of  funds  from  grants  already  made.  As  a  re- 
'  suit,  the  services  have  no  incentive  to  economize  in  the 
expenditure  of  the  funds  appropriated,  since  all  sur- 
pluses so  realized,  instead  of  being  available  for  use  by 
the  services  effecting  the  economy  by  their  transfer  to 
other  heads,  must  be  covered  back  into  the  general 
treasury.  The  use  of  deficiency  appropriation  acts  thus 
not  only  tends  to  throw  the  whole  appropriation  and 
accounting  system  out  of  gear,  but  results  in  an  increase 
in  total  appropriations. 

American  practice  thus  is  based  upon  no  principle. 
It  is  a  mere  makeshift  and  has  all  the  evils  usually 
characterizing  makeshifts. 


CHAPTER  IV 

THE  PROBLEM  OF  THE  ESTABLISHMENT  OF 
A  BUDGET  SYSTEM  BY  THE  NATIONAL 
GOVERNMENT 

In  the  foregoing  chapters  we  have  attempted  to  sub- 
ject the  whole  problem  of  a  budget  to  scientific  analysis, 
to  make  known  the  nature  and  function  of  a  budget  as 
a  tool  of  administration,  and  to  describe  the  several 
steps  that  have  to  be  taken  if  an  effective  budgetary 
system  is  to  be  established.  It  remains  to  consider  how 
the  outstanding  advantages  of  such  a  system  may  most 
readily  and  practicably  be  realized  in  our  national 
government. 

Present  Budgetary  Practice  of  the  United  States  Gov- 
ernment. In  scarcely  a  single  respect  do  the  present 
practices  of  our  national  government  conform  to  the 
essential  requisites  of  a  sound  system  of  national 
finance.  No  attempt  is  made  to  consider  the  whole 
problem  of  financing  the  government  at  one  time.  Ex- 
penditures are  not  considered  in  connection  with  rev-i 
enues.  Even  the  idea  of  balancing  the  budget  does  not 
exist.  Though  the  Secretary  of  the  Treasury  is  re- 
quired to  lay  before  Congress  each  year  the  estimates 
of  expenditures  for  the  year  to  come,  these  estimates 
far  from  represent  a  consistent  financial  program.  The 
essential  basis  for  the  elaboration  of  such  a  program 
exists  neither  in  law  nor  in  practice.  Though  the  law 

55 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

requires  all  the  estimates  to  be  submitted  by  the  Secre- 
tary of  the  Treasury,  that  officer  acts  as  a  mere  com- 
piling authority;  he  has  no  power  to  modify  the  pro- 
posals transmitted  to  him  by  the  heads  of  the  adminis- 
trative departments.  The  estimates  thus  represent  little 
more  than  the  individual  desires  of  the  departmental 
heads.  The  President,  to  be  sure,  might  exercise  his 
general  powers  to  secure  a  coordination  of  the  estimates 
and  their  conformity  to  a  general  policy.  He,  however, 
has  no  service  through  which  he  can  effectively  exercise 
such  authority.  There  is  absolutely  lacking  any  organ 
at  all  corresponding  in  character  or  powers  to  the  Treas- 
ury under  the  British  system.  The  accounting  and  re- 
porting system  of  the  government  is  not  such  as  to 
develop  the  information  needed  in  order  to  construct  a 
proper  budget.  No  standard  classifications  of  units  of 
organization,  functions,  or  activities,  and  of  expendi- 
tures according  to  their  character  and  object,  or  service 
purchased  have  been  officially  adopted.  No  uniform 
scheme  of  expenditure  documents  calling  for  the  record- 
ing of  expenditure  data  in  accordance  with  any  general 
informational  plan  has  been  put  into  practice.  The  idea 
that  a  system  of  accounts  should  have  for  its  purpose 
to  produce  information  needed  for  the  proper  conduct 
of  affairs  as  well  as  to  establish  the  fidelity  with  which 
legal  provisions  are  carried  out  scarcely  exists.  The 
estimates,  such  as  they  are,  are  not  compiled  in  accord- 
ance with  any  one  principle,  nor  in  such  a  way  that 
their  significance  can  be  clearly  seen.  There  is  no  budg- 
etary message,  no  proper  scheme  of  summary,  analyti- 
cal and  comparative  tables.  Nothing  in  the  nature  of  a 
balance  sheet  is  provided.  The  administrative  reports 
are  prepared  without  any  reference  to  their  serving  as 

56 


ESTABLISHMENT  OF  A  BUDGET  SYSTEM 

supporting  documents  to  the  estimates,  nor  are  they 
used  to  any  extent  for  such  purpose. 

Turning  from  the  matter  of  the  formulation  of  a 
budget  to  that  of  action  upon  its  recommendations,  an 
equal  failure  to  establish  a  procedure  conforming  to 
proper  budgetary  requirements  is  found.  The  two  sides 
of  the  budget  are  considered  independently  of  each 
other  and  by  separate  committees.  The  attempt  is  not 
even  made  to  concentrate  in  one  committee  the  responsi- 
bility for  the  formulation  of  an  expenditure  program. 
Provision  for  expenditures  is  made  through  the  passage 
of  no  less  than  thirteen  general  appropriation  acts 
emanating  from,  and  piloted  through  the  House  by,  no 
less  than  nine  different  committees.  In  most  cases  the 
needs  of  each  service  are  not  even  considered  by  a  single 
committee  nor  provided  for  in  a  single  appropriation 
act.  It  is  exceptional  where  this  is  the  case.  Most 
services  are  appropriated  for  in  a  number  of  appropria- 
tion acts.  Not  the  first  approach  has  been  made  toward 
a  solution  of  the  difficult  but  exceedingly  important 
problem  of  harmonizing  the  conflicting  factors  of  con- 
trol and  flexibility  in  respect  to  the  expenditure  of 
funds.  No  consistent  plan  is  followed  in  respect  to  the 
itemization  of  appropriations  or  the  permitting  of 
transfers  between  subheads  or  items  of  appropriations. 

Our  national  government,  in  a  word,  has  neither 
adopted  nor  made  any  step  toward  the  adoption  of  a 
budgetary  system.  More  than  that,  it  has  not  even 
worked  out  any  alternative  system  corresponding  to 
sound  principles  of  financial  administration.  One  can 
understand,  though  he  may  not  indorse,  the  principle 
that  the  determination  of  what  revenues  shall  be  author- 
ized and  what  expenditures  shall  be  made  shall  rest  with 
Congress  rather  than  with  the  Executive.  It  is  impos- 

57 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

sible,  however,  to  defend  a  system  under  which  that 
body  does  not  compel  the  Executive  to  lay  before  it  a 
report  of  past  expenditures,  statements  of  current  con- 
ditions, and  estimates  of  future  revenue  and  expendi- 
ture needs  that  will  enable  it  intelligently  to  consider 
the  problem  of  making  provision  for  the  financial  needs 
of  the  government,  nor  give  to  itself  the  organization 
that  will  enable  it  effectively  to  perform  this  function. 

A  Budget  System  Constitutional.  There  are  many  who 
accept  the  superiority  of  the  budgetary  over  any  other 
system  of  providing  for  the  financial  needs  of  a  gov- 
ernment, but  question  seriously  whether  this  system 
can  be  adopted  by  the  United  States  so  long  as  it  ad- 
heres to  the  theory  of  the  separation  of  the  legislative 
and  executive  powers  and  the  doctrine  that  the  admin- 
istrative  power  resides  primarily  in  the  legislature 
rather  than  in  the  executive,  the  latter  being  deemed  to 
be  but  the  agent  of  the  former  for  carrying  out  its 
orders. 

That  this  feature  of  our  government  has  an  impor- 
tant bearing  upon  the  problem  of  the  adoption  by  it  of 
a  budgetary  system,  is  evident.  Without  doubt  the  budg- 
etary system  in  its  completely  developed  form  finds  its 
readiest  application  in  a  responsible  government  such 
as  that  of  Great  Britain.  There,  responsibility  for  the 
exercise  of  legislative,  executive  and  administrative 
powers  is  vested  in  one  body — the  Ministry.  The  same 
organ  that  formulates  the  budget  is  thus  the  one  that, 
in  effect,  determines  the  manner  and  form  in  which  it 
shall  be  prepared  and  the  action  that  shall  be  had  upon 
it.  The  use  of  the  budgetary  system,  in  so  far  as  it 
calls  for  the  formulation  by  the  Ministry  of  a  definite 
financial  and  work  program  by  which  it  undertakes  to 

58 


ESTABLISHMENT  OF  A  BUDGET  SYSTEM 

stand  or  fall,  may  thus  be  said  to  be  almost  an  essential 
feature  of  the  responsible  type  of  government. 

Notwithstanding  the  special  applicability  of  the  budg- 
etary system  to  a  responsible  government,  and  the 
apparent  advantages  that  this  type  of  government  has 
in  its  actual  operation,  it  can  be  shown  that  the  system, 
in  its  most  essential  aspects  at  least,  can  be  adopted  by 
our  national  government  if  it  desires  to  do  so,  and  with- 
out making  any  change  in  our  present  constitutional 
system. 

Excellence  of  British  Budget  System  Due  to  Procedure 
Rather  than  Constitutional  System.  In  supporting  this 
statement  the  fact  first  to  be  noted  is  that  the  excel- 
lence of  the  present  budgetary  system  of  England  is 
due  not  solely,  or  even  primarily,  to  the  character  of 
the  governmental  system  of  that  country.  It  is  due 
rather  to  the  principles  of  procedure  that  have  been 
adopted  in  respect  to  the  formulation  and  consideration 
of  the  budget,  principles  which  can  equally  well  be 
adopted  by  our  national  government  if  it  is  so  minded. 
On  the  other  hand,  that  the  responsible  type  of  govern- 
ment does  not  necessarily  carry  with  it  a  good  budgetary 
system  needs  no  other  demonstration  than  the  example 
of  France  where  the  administration  of  the  national 
finances  is  little  if  any  better  than  that  of  the  United 
States. 

If  one  looks  for  the  secret  of  the  excellence  of  the 
English  system,  it  must  be  found  in  the  following  facts, 
all  of  which  are  matters  purely  of  internal  organization 
and  procedure.    First,  and  most  important,  is  the  clear/  [ 
distinction  that  is  made  between  legislative  and  admin- *  \ 
istrative  powers.    Parliament,  notwithstanding  its  com- 
plete sovereignty,  that  is,  its  legal  power  to  do  any  act 

59 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

within  the  competence  of  a  government,  whether  it  is 
of  a  legislative,  an  executive,  an  administrative,  or  even 
a  judicial  character,  has  wholly  refrained  from  the  at- 
tempt itself  directly  to  exercise  administrative  powers. 
As  an  essential  feature  of  this  policy  it  has  definitely 
established  the  principle  that  the  formulation  of  pro- 
posals for  the  expenditure  of  funds  is  a  matter  which 
should  rest  wholly  with  the  administrative  branch  of  the 
government.  By  a  self-denying  ordinance,  it  has  ac- 
cordingly embodied  in  the  standing  orders  or  rules  gov- 
erning its  proceedings  the  doctrine  that  no  proposals 
for  the  expenditure  of  funds  shall  be  made  or  considered 
except  such  as  are  brought  forward  by  the  Cabinet  act- 
ing as  the  custodian  of  the  administrative  powers  of 
government,  and  that  no  motion  shall  be  in  order  to 
increase  the  amount  carried  by  any  such  proposal. 
Theoretically,  Parliament  retains  the  right,  on  its  own 
initiative,  to  move  and  carry  motions  for  a  reduction  in 
the  amount  of  cabinet  proposals.  Actually,  however, 
owing  to  the  fact  that  the  Cabinet  is  responsible  for  all 
its  proposals,  this  right  cannot  be  effectively  exercised 
without  bringing  about  a  change  of  ministry.  Motions 
for  reductions  in  expenditure  proposals  are  thus  mostly 
of  a  pro  forma  character,  being  made  only  for  the  pur- 
pose of  raising  discussion  on  certain  features  of  the 
budget  or  administrative  practices,  and  being  with- 
drawn when  the  discussion  is  terminated. 

The  result  of  the  adoption  by  Parliament  of  these 
rules  is  to  throw  the  whole  responsibility  for  the  for- 

Imilation  of  a  financial  and  work  program  upon  the 
idministrative  branch  of  the  government.  This  respon- 
sibility moreover  must  be  a  collective  one,  as  all  pro- 
posals for  expenditures  must  represent  the  act  of  the 

60 


ESTABLISHMENT  OF  A  BUDGET  SYSTEM 

Ministry  as  a  whole,  and  not  that  of  its  individual 
members. 

Secondly,  the  Ministry,  in  its  capacity  as  the  seat  of 
administrative  authority  and  responsibility,  has  adopted 
the  policy  of  presenting,  as  far  as  is  feasible,  all  of  its 
financial  proposals  in  one  consolidated  document  in  such 
a  way  that  the  relationship  between  the  two  sides  of  the 
account  may  be  clearly  seen,  in  other  words,  in  the  form 
of  a  budget.  Manifestly,  this  is  purely  a  matter  of  ad- 
ministrative practice  and  in  no  way  dependent  upon  the 
fact  that  the  political  system  of  the  country  is  that  of  a 
responsible  government. 

Thirdly,  Parliament  has  so  framed  its  rules  of  pro- 
cedure that  the  budget  thus  presented  to  it  will  be  con- 
sidered as  a  whole  at  one  time  and  by  the  same  organ, 
the  committee  of  the  whole. 

Finally,  and  in  some  respects  the  most  important  of 
all,  provision  has  been  made,  in  the  Treasury  Depart- 
ment, for  an  organ  whose  special  function  it  is  to  have 
full  charge  of  the  entire  work  not  only  of  formulating 
a  budget  but  of  subsequently  seeing  that  its  provisions, 
as  embodied  in  the  appropriation  acts,  arejduly  com- 
plied with.  In  order  that  it  may  perfofnT  this  function 
effectively,  it  has,  as  has  previously  been  pointed  out,  a 
position  independent  of,  and  superior  to,  the  administra- 
tive services  proper.  It  is  in  no  sense  a  treasury  depart- 
ment such  as  the  Treasury  Department  of  the  United 
States.  It  does  not  attend  to  the  collection,  custody  and 
disbursement  of  the  public  revenues.  These  duties  are 
performed  by  the  so-called  revenue  departments,  the 
Bank  of  England,  the  Paymaster-General,  etc.  Its 
functions  are  solely  those  of  direction,  supervision  and 
control.  The  completeness  of  its  authority  may  be  seen 
from  the  following.  The  estimates  for  appropriations 

61 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

represent  its  act,  not  those  of  the  services  for  whose  use 
they  are  intended,  since  it  has  full  power  to  modify  all 
estimates  transmitted  to  it  by  the  several  services  for 
inclusion  in  the  budget.  Against  its  decision  an  appeal 
lies  only  to  the  Cabinet,  and,  as  the  latter  almost  in- 
variably supports  the  Treasury  contention,  such  an 
appeal  is  rarely  made.  It  is  the  authority  whose  ap- 
proval must  be  obtained  for  any  transfer  of  funds  from 
one  appropriation  account  to  another.  No  increase  in 
personnel  or  change  in  compensation  can  be  made  with- 
out its  previous  approval.  And,  in  many  other  ways,  it 
acts  as  the  controlling  authority  through  which  the 
organization,  system  of  personnel,  and  administration 
practices  are  standardized  and  unity  given  to  the  whole 
financial  and  work  program  of  the  government. 

We  have  entered  thus  fully  into  an  account  of  the 
means  employed  by  Great  Britain  in  achieving  its  excel- 
lent budgetary  system  since  it  is  important  to  point  out 
to  how  large  an  extent  they  are  not  necessary  conse- 
quences of  the  adoption  by  that  country  of  the  responsi- 
ble type  of  government,  but  may  be  put  into  practice  by 
any  government,  and  also  because  they  so  clearly  point 
out  the  action  that  should  be  taken  by  the  United  States 
in  seeking  to  get  upon  a  similarly  satisfactory  basis. 

Adoption  of  Principle  of  Formulation  of  Budget  by  the 
President  the  First  Step.  In  working  out  a  program 
of  action  for  the  United  States,  regard  must  at  the 
outset  be  had  of  the  distinction  which  we  have  made 
between  the  two  operations  of:  (i)  formulating  a 
budget;  and  (2)  taking  action  upon  a  budget  when 
formulated.  Under  our  theory  of  government  it  is  the 
legislative  branch  which  determines  what  revenues  shall 
be  raised  and  how  they  shall  be  expended.  There  is 

62 


ESTABLISHMENT  OF  A  BUDGET  SYSTEM 

little  or  no  chance  that  Congress  will  at  this  time  will- 
ingly surrender  any  substantial  part  of  this  power. 
There  is  nothing,  however,  in  the  demand  for  the  adop- 
tion of  a  budgetary  system,  in  so  far  as  the  formation 
of  a  revenue  and  expenditure  program  is  concerned, 
that  infringes  this  power.  On  the  contrary,  as  already 
made  clear,  the  adoption  of  such  a  system  is  essential  if 
Congress  is  effectively  to  exercise  its  fund-raising  and 
granting  authority.  By  no  other  means  can  that  body 
get  the  data  before  itself  in  such  a  form  that  it  can  act 
intelligently.  First  efforts  should  therefore  be  directed 
toward  the  taking  of  action  that  will  ensure  that  the 
President  will  lay  before  Congress  each  year,  upon  its 
assembling,  a  budgetary  statement  corresponding  to  the 
one  described  in  the  foregoing  pages. 

We  have  pointed  out  in  a  preceding  chapter  that  the 
adoption  of  this  principle  of  having  the  chief  executive 
lay  before  the  legislature  a  comprehensive  budget  can- 
not be  effectively  applied,  or  at  least  if  applied  will  not 
give  thoroughly  satisfactory  results  in  practice  unless 
the  chief  executive  is  definitely  recognized  as  the  head 
of  the  administration. 

Fortunately  such  a  unity  of  general  direction  and 
control  now  exists  in  the  national  government.  What- 
ever may  be  his  powers  from  a  strictly  legal  standpoint, 
the  position  of  the  President  as  head  of  the  administra- 
tion is  now  firmly  established.  Through  his  powers  of 
nomination  and  of  dismissal  of  administrative  officers, 
and  through  the  generally  acquiesced-in  principle  that 
administrative  officers  should  make  their  acts  conform 
to  his  wishes,  the  President  is  now  in  a  position  where 
he  can,  if  he  is  so  minded,  make  his  will  prevail  in 
respect  to  administrative  matters.  From  this  stand- 
point our  national  government  thus  has  already  the  gen- 

63 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

eral  administrative  system  that  must  obtain  if  a  proper 
budgetary  system  is  to  be  established. 

Creation  of  Organ  of  General  Administration  the  Sec- 
ond Step.  Though  the  President  thus  occupies  the 
position  where  he  is  recognized  as  the  head  of  the  ad- 
ministration, he  is  unable,  in  point  of  fact,  effectively 
to  exercise  the  duties  of  that  position  due  to  the  fact 
that  he  has  no  organization  through  which  he  can  do  so. 
The  next  essential  step  to  the  introduction  of  a  budget 
system  is,  therefore,  that  of  providing  the  President 
with  a  special  service  through  which  he  may  effectively 
exercise  his  powers  of  general  direction  and  control. 
This  is  a  step  of  the  highest  importance  both  from  the 
standpoint  of  budgetary  reform  and  that  of  improving 
the  system  of  administration  of  the  national  govern- 
ment generally. 

The  activities  of  the  government  are  expanding  at  a 
very  rapid  rate  and  new  services  are  constantly  being 
created.  If  these  services  are  to  be  converted  into  one 
smoothly-working  administrative  system,  if  duplication 
and  overlapping  of  authority,  organization,  plant  and 
work  are  to  be  avoided,  and  efficiency  in  operation  ob- 
tained, provision  must  be  made  for  the  vesting  of  gen- 
eral authority  over  all  in  some  one  office.  One  of  the 
great  merits  of  the  budgetary  system  is  that  it  repre- 
sents a  unity  of  purpose  and  control  in  respect  to  admin- 
istrative matters.  A  proper  budgetary  system  cannot 
be  had  when  the  several  administrative  officers  are  not 
subject  to  such  a  central  control  and  are  permitted  to 
make  recommendations  for  appropriations  on  their  in- 
dividual responsibilities.  Few  needs  are  more  impera- 
tive than  that  the  national  government  be  given  an 

64 


ESTABLISHMENT  OF  A  BUDGET  SYSTEM 

organ  corresponding  in  status  and  powers  to  the  Treas- 
ury Department  of  Great  Britain. 

It  is  recognized  that  there  will  be  great  opposition  on 
the  part  of  the  departments  to  the  creation  of  a  service 
that  may  be  regarded  as  having  a  status  and  authority 
superior  to  their  own.  This  opposition  can  best  be  over- 
come by  making  it  clear  that  such  would  not  be  the 
result.  The  superior  authority  is,  and  should  continue 
to  remain,  that  of  the  President.  The  proposed  service 
should  be  but  the  agent  or  instrument  made  use  of  by 
the  President  in  the  exercise  of  this  authority. 

With  such  a  service  established  the  President  can 
immediately  enter  upon  the  work  of  devising  and  pre- 
scribing the  system  of  accounts  and  reports  necessary  in 
order  to  produce  the  data  required  by  him  if  he  is  to 
prepare  a  budget  in  proper  form,  and  in  preparing  the 
forms  upon  which  estimates  must  be  submitted  and  the 
instructions  and  regulations  to  accompany  them. 

In  performing  this  work  such  a  bureau  ought  to  find 
of  great  assistance  the  work  done  in  this  field  by  Presi- 
dent Taft's  Commission  on  Economy  and  Efficiency. 
That  Commission,  as  the  result  of  exhaustive  studies  of 
the  subject,  prepared  and  published  a  detailed  outline  of 
organization  of  the  government,  thus  presenting  for  the 
first  time  a  complete  picture  of  the  organization  of  the 
government  and  the  precise  position  occupied  by  each 
unit  of  organization  in  relation  to  all  other  units,  a 
classification  of  the  functions  of  government,  a  classi- 
fication of  objects  of  expenditure  and  a  scheme  for  pre- 
senting expenditures  according  to  their  character.  It 
also  reported  on  the  problem  of  expenditure  documents, 
recommending  a  scheme  of  documents  that  would  fur- 
nish the  information  required  for  budgetary  and  gen- 
eral accounting  purposes.  Finally,  in  two  reports,  it 

65 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

discussed  the  whole  problem  of  a  national  budget.1  It  is 
not  to  be  expected  that  all  of  the  recommendations  of 
the  Commission  will  be  accepted.  They  cannot  fail, 
however,  to  be  of  value  as  a  starting  point  from  which 
to  undertake  this  work. 

If  the  foregoing  action  is  taken  a  great  advance 
toward  the  evolution  of  a  scientific  budgetary  system 
will  be  made.  Should  the  reform  of  present  practices 
go  no  farther,  the  gain  will  be  enormous.  The  Presi- 
dent and  his  Cabinet  will  be  held  to  a  rigid  accounting 
for  the  manner  in  which  affairs  are  administered  by 
them,  and,  at  the  same  time,  will  be  furnished  an  oppor- 
tunity to  bring  forward  a  clear-cut  and  comprehensive 
financial  and  work  program  for  the  future.  Congress 
will  for  the  first  time  be  furnished  with  information 
regarding  the  financial  condition  and  needs  of  the  gov- 
ernment in  such  a  form  that  it  can  intelligently  perform 
its  function  of  determining  what  provision  for  the 
future  shall  be  made.  Finally,  the  general  public  will 
be  given  an  opportunity,  such  as  it  has  never  yet  en- 
joyed, of  gaining  a  clear  conception  of  what  the  govern- 
ment has  done  and  proposes  to  do,  and  thus  be  in  a 
position  to  make  known  its  wishes  with  a  definiteness 
that  has  hitherto  been  denied  to  it.  In  all  this  there  will 
be  nothing  that  will  detract  in  any  way  from  the  present 
powers  of  Congress.  On  the  contrary  the  action  pro- 
posed represents  the  establishment  of  means  through 
which  these  powers  may  be  more  effectively  exercised. 
It  would  seem,  therefore,  that  Congress  should  be  the 
first  to  recognize  the  importance  and  to  insist  upon  the 
carrying  through  of  this  program. 

1The  Need  for  a  National  Budget.  House  Doc.  No.  854,  62d 
Cong.,  2d  sess.  A  Budget  for  the  Fiscal  Year  1914  (Senate  Doc.  No. 
1113,  62d  Cong.,  3d  sess.). 

66 


ESTABLISHMENT  OF  A  BUDGET  SYSTEM 

Establishment  of  a  Single  Budget  Committee  in  House 
of  Representatives  a  Third  Step.  From  the  question  of 
the  formulation  of  a  budget,  we  now  turn  to  the  steps 
that  should  be  taken  to  improve  the  procedure  now 
employed  in  acting  upon  budgetary  proposals.  If 
we  keep  in  mind  the  fundamental  theory  of  a  budget- 
that  consideration  should  be  given  to  all  the  finan- 
cial needs  of  a  government  at  one  time,  to  the  end 
that  a  consistent  financial  program  may  be  devised — the 
direction  that  these  steps  should  take  is  clearly  indicated. 
That  its  unity  may  not  be  destroyed  it  is  of  prime  im- 
portance that  consideration  of  the  budget  should  be  had 
by  one  committee.  This  means  that  the  House  of 
Representatives  should  make  provision  for  one  general 
committee  on  finance  in  substitution  of  its  present 
committees  on  ways  and  means  and  appropriations,  and 
should  provide  by  its  rules  that  all  appropriation  bills 
shall  originate  with  this  committee  instead  of  permitting 
these  bills,  as  at  present,  to  originate  in  no  less  than  nine 
committees. 

It  is,  of  course,  appreciated  that  the  taking  of  this 
action  will  result  in  the  creation  of  a  committee  of 
great  powers  and  will  entail  the  throwing  upon  this 
committee  of  a  great  volume  of  work  and  responsibility. 
This  concentration  of  powers  and  responsibility  will, 
however,  be  an  advantage  rather  than  a  disadvantage. 
As  regards  the  amount  of  work  to  be  done,  a  distribu- 
tion of  it  can  be  had  as  well  within  a  single  committee, 
through  the  formation  of  subcommittees,  as  through  the 
establishment  of  a  number  of  coordinate  committees.  If 
the  concentration  of  jurisdiction  over  both  revenue  and 
expenditure  matters  in  a  single  committee  is  deemed  too 
radical  an  action  to  be  taken  at  once,  a  great  advance 
will  nevertheless  be  made  simply  by  providing  for  a 

67 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

single  committee  on  appropriations  instead  of  the  nine 
or  more  committees  now  authorized  to  report  measures 
carrying  appropriations. 

If  this  policy  of  concentrating  the  power  to  report 
bills  carrying  appropriations  exclusively  in  the  hands  of 
a  single  appropriation  or  budget  committee  is  to  be 
effectively  carried  out,  a  clear  distinction  must  be  made 
in  the  rules  of  the  House  between  bills  having  for  their 
purpose  the  authorization  of  action  and  those  appro- 
priating the  money  by  which  this  action  may  be  ex- 
ecuted. The  consideration  and  reporting  of  bills  of  the 
first  character  will,  as  at  present,  remain  in  the  hands 
of  the  general  committees.  The  rules,  however,  should 
prohibit  the  incorporation  in  these  bills  of  clauses  carry- 
ing appropriations.  It  should  remain  for  the  committee 
on  appropriations  to  decide  as  to  the  extent  to  which  the 
condition  of  the  finances  and  other  demands  render  it 
desirable  that  funds  should  be  immediately  voted  for 
the  taking  of  the  action  thus  authorized. 

With  full  power  over  appropriations,  and  with  com- 
plete and  systematically  arranged  data  regarding  the 
financial  transactions  and  needs  of  the  government  in 
its  hands,  the  committee  on  the  budget  or  the  committee 
on  appropriations  will  be  in  a  position  to  work  out  a 
more  consistent  scheme  of  appropriation  heads  corre- 
sponding to  the  classification  of  expenditures  and  esti- 
mates in  the  budget.  It  can,  and  should,  also  seek  to 
devise  and  put  into  practice  principles  whereby  control 
may  be  harmonized  with  flexibility  in  respect  to  the 
expenditure  of  the  funds  voted. 

An  important  question  will,  of  course,  arise  as  to  the 
extent  to  which  the  recommendations  of  the  committee 
on  appropriations,  as  embodied  in  the  appropriation  bill, 
will  be  open  to  amendment  when  the  bill  is  considered 

68 


ESTABLISHMENT  OF  A  BUDGET  SYSTEM 

in  committee  of  the  whole  or  by  the  House  itself.  It  is 
hardly  desirable  that  we  should  here  attempt  any  con- 
sideration of  the  technical  problems  of  Congressional 
procedure.  We  can  only  mention  this  question  as  one 
of  the  problems  that  will  have  to  be  solved,  and  express 
our  opinion  that  the  rules  should  be  so  framed  as  to 
throw  every  possible  safeguard  around  the  preserva- 
tion of  the  unity  of  the  financial  program  as  worked 
out  by  the  committee  on  appropriations.1 

Coordination  of  Budget  Procedure  in  the  Two  Houses. 

Another  serious  question  will  be  that  of  coordi- 
nating or  harmonizing  the  action  of  the  Senate  with 
that  of  the  House  in  respect  to  the  financial  program. 
No  single  obvious  method  by  which  this  can  be  done,  as 
in  the  case  of  other  questions,  can  be  indicated.  To  the 
writer,  however,  the  most  effective  method  would  seem 
to  be  either  the  constitution  by  the  two  houses  of  a 
single  joint  committee  on  the  budget,  which  will  report 
its  joint  findings  to  the  two  houses,  or  the  constitutionf 
by  the  two  houses  of  committees  having  the  same  char-i 
acter  as  regards  their  composition,  power,  internal  or-| 
ganization  and  procedure.  Of  these  two  methods  the 
first  would  appear  to  be  the  preferable  one.  It  would 
do  away  with  the  double  hearings  which  now  serve  no 
useful  purpose,  and  would  avoid  the  great  delay  which 
now  takes  place  due  to  the  fact  that  the  Senate  cannot 
begin  the  consideration  of  appropriation  bills  until 
action  upon  them  has  been  had  by  the  House. 

Comparison   of   Proposed   Plan  with   British   System. 

The  foregoing  suggestions  represent  as  great  an  ad- 

'One  phase  of  legislative  organization  and  procedure  is,  however, 
discussed  in  Chapter  VI  of  this  work. 

69 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

vance  toward  the  introduction  of  a  budget  system  in 
our  national  government  as  may  with  any  reason  be 
looked  for  in  the  immediate  future.  It  is  of  interest, 
therefore,  in  concluding  our  consideration  of  the  sub- 
ject, to  contrast  such  a  system,  should  it  be  adopted, 
with  that  now  employed  by  Great  Britain  and  to  point 
out  in  how  far,  if  at  all,  it  fails  to  secure  the  undoubted 
advantage  of  that  system. 

In  attempting  such  a  contrast  the  first  point  to  be 
noted  is  that,  as  regards  the  fundamental  question  of 
the  formulation  of  a  budget  there,  there  is,  or  need  be, 
no  difference  between  the  two  systems.  There  is  noth- 
ing, in  our  theory  of  separation  of  powers  to  prevent  the 
definite  establishment  of  the  principle  of  concentrating 
in  the  hands  of  the  President  both  the  obligation  and 
the  power  to  present  to  Congress  a  complete,  coordi- 
nated statement  of  the  financial  condition,  operations, 
and  needs  of  the  government.  There  is  thus  no  reason 
why  our  government  should  not  at  once  take  the  action 
that  will  give  to  it  the  incontestable  advantages  of  this 
system  whether  viewed  from  the  standpoint  of  the 
Executive  or  of  Congress. 

It  is  only  when  coming  to  the  question  of  taking  action 
upon  the  budget,  of  framing  the  revenue  and  appropria- 
tion acts  that  are  required  for  putting  into  effect  the 
budgetary  proposals,  that  the  two  systems  present  points 
of  difference.  The  essential  feature  of  these  differences 
consists  in  the  fact  that  in  the  British  system  the  same 
authority,  the  Cabinet,  which  is  responsible  for  the 
formulation  of  the  budget,  is,  in  effect,  the  authority 
dictating  the  action  that  shall  be  had  upon  such  budget, 
while  in  the  United  States  these  two  functions  or  powers 
are  vested  in  separate  and  independent  authorities,  the 
President  and  Congress.  That  this  separation  of 

70 


ESTABLISHMENT  OF  A  BUDGET  SYSTEM 

powers  makes  the  problem  of  working  out  and  adopt- 
ing a  consistent,  unified  financial  program  far  more  dirfi- . 
cult,  than  is  the  case  under  the  British  system  of  a  union! 
of  powers,  is  evident.  It  does  not  mean,  however,  that 
these  difficulties  are  such  that  they  cannot  be  overcome 
if  Congress  is  once  convinced  of  the  inherent  merits  of 
the  budgetary  system,  can  be  made  to  see  that  its  adop- 
tion represents  no  derogation  of  its  constitutional 
powers,  and  can  come  to  an  understanding  of  the  action 
that  is  required  for  its  establishment.  The  essential 
feature  of  this  action  is,  as  we  have  seen,  that  Congress 
shall  provide  for  a  concentration  in  one  organ  of  author- 
ity in  respect  to  the  consideration  of,  and  action  upon, 
budgetary  proposals,  that  is  provided  for  in  respect  to 
the  formulation  of  the  budget.  If  this  is  done,  there  is 
as  definite  a  location  of  responsibility  as  is  provided  for 
in  the  British  system. 

In  their  practical  operation  the  difference  between  the 
two  systems  will  be  this.  Under  the  British  system  the 
estimates  as  originally  framed  by  the  several  revenue 
and  spending  departments  are  examined,  criticized  and 
revised  for  final  action  by  the  Treasury  Department,  a 
service  which,  for  this  purpose,  may  be  viewed  as  either 
a  branch  of  the  administration  or  an  agent  of  the  legis- 
lature. Under  the  American  system,  this  work  will  be 
performed  by  the  committee  on  the  budget  or  the  com-s 
mittee  on  appropriations.  The  great  advantage  of  the 
British  system  of  Treasury  scrutiny  and  control  over 
that  of  scrutiny  and  control  by  a  committee  on  appro- 
priations lies  in  the  fact  that  the  former  is  a  permanent 
organization.  Only  slowly  does  its  personnel  change. 
It  functions  throughout  the  year.  It  has  permanent 
records,  an  expert  personnel,  and  an  accumulated  ex- 
perience in  dealing  with  the  problem  of  administration 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

,and  expenditure.  There  is  no  reason,  however,  why  a 
committee  on  appropriations  should  not  provide  itself 
with  most  if  not  all  of  these  advantages.  All  that  would 
be  required  would  be  that  the  committee  should  equip 
itself  with  a  permanent  staff  whose  duties  would  extend 
throughout  the  year,  that  this  staff  should  have  the  duty 
of  keeping  itself  thoroughly  informed  regarding  the 
organization  and  activities  of  the  government,  and  that 
it  should  build  up  a  set  of  records  and  reports  that 
would  enable  the  committee  at  once  to  secure  the  in- 
formation that  it  needed  in  interpreting  budgetary  pro- 
posals. Were  this  done  the  necessity  for  the  prolonged 
and  voluminous  hearings  now  held  by  the  committee  in 
order  to  extract  needed  information  by  the  question  and 
answer  method  would  be  largely  done  away  with.  The 
present  Committee  on  Appropriations  of  the  House  has 
now  in  fact  the  beginnings  of  such  a  service  in  the  office 
of  the  secretary  of  the  committee,  an  office  which,  until 
his  recent  death,  had  been  continuously  held  through 
varying  administrations  by  the  same  exceedingly  com- 
petent official. 

Finally,  it  should  be  remarked  that  the  American  sys- 
tem under  which  budgetary  proposals  are  critically  ex- 
amined and  passed  upon  by  a  body  independent  of  the 
branch  of  government  responsible  for  their  formulation 
has  certain  advantages  from  the  standpoint  of  control 
that  the  British  system  does  not  offer.  The  fact  that 
both  its  action  in  the  past  and  its  proposals  will  be  so 
examined  and  criticized  by  an  independent  authority 
cannot  but  act  as  a  strong  influence  upon  the  executive 
to  conduct  its  affairs  and  frame  requests  that  will  not 
be  open  to  successful  criticism. 

In  seeking  thus  to  point  out  the  way  in  which  our 
government  may  bring  into  existence  an  effective  budg- 

72 


ESTABLISHMENT  OF  A  BUDGET  SYSTEM 

etary  system,  the  writer  is  extremely  desirous  of  avoid- 
ing the  appearance  of  minimizing  the  difficulties  that 
these  proposals  present.  On  the  contrary,  it  has  been 
one  of  his  main  objects  in  preparing  this  paper  to  make 
known  the  magnitude  of  the  undertaking  and  the  many 
kinds  of  action  that  must  be  taken  if  success  is  to  be 
achieved.  In  particular  he  wishes  to  emphasize  the 
fact  that  even  if  all  the  action  suggested  by  him  is  taken 
there  will  still  remain  the  great  problem  of  correlating 
the  action  of  Congress  and  the  executive  to  the  end  that 
these  two  branches  of  government  may  work  in  har- 
mony toward  the  common  end  of  securing  an  efficient 
and  economical  administration  of  the  finances  of  the 
nation.1 

*A  special  examination  of  this  problem  and  a  proposal  of  a  means 
through  which  it  may  be  met  will  be  found  in  Chapter  VI. 


CHAPTER  V 

THE  NATIONAL  GOVERNMENT  AS  A  HOLD- 
ING CORPORATION:  THE  QUESTION  OF 
SUBSIDIARY  BUDGETS  x 

No  phenomenon  in  the  field  of  American  politics  is  of 
greater  significance  than  the  increasing  scope,  magni- 
tude and  complexity  of  the  tasks  that  are  being  imposed 
upon  our  national  government.  It  is  hardly  necessary 
to  state  that  this  great  increase  in  both  the  volume  and 
the  variety  of  the  duties  of  that  government  correspond- 
ingly complicates  and  renders  more  difficult  the  securing 
of  an  efficient  administration  of  public  affairs.  This 
increase  in  the  burden  thrown  upon  the  machinery  of 
government  manifests  itself  in  all  departments  of  the 
government,  but  particularly  in  the  administrative  and 
the  legislative  branches.  For  years  past  the  task  of 
organizing  and  correlating  the  several  services  of  the 
national  government  so  as  to  avoid  overlapping  of  juris- 
dictions and  duplication  of  plant,  organization  and 
work,  and  to  insure  that  all  will  work  as  one  harmoni- 
ous piece  of  administrative  mechanism,  has  been  one  of 
the  most  serious  problems  confronting  the  government. 
One  needs  but  a  slight  acquaintance  with  conditions  at 
Washington  to  know  that  this  problem  has  been  by  no 
means  solved  and  that  conditions  in  this  respect  are  far 
from  satisfactory.  Every  new  activity  undertaken  and 

1  Reprinted    from  the   Political   Science   Quarterly,   Vol.    XXXII, 
No.  4,  December,  1917. 

74 


QUESTION  OF  SUBSIDIARY  BUDGETS 

every  new  service  established  adds  to  the  complexity  of 
this  problem.  Steadily  the  administrative  branch  of  the 
government  is  becoming  more  unwieldy,  more  compli- 
cated, and  more  difficult  to  operate  as  one  piece  of  inte- 
grated machinery. 

In  the  legislative  branch  the  effect  of  this  increase  in 
the  volume  and  variety  of  work  to  be  performed  is,  if 
possible,  even  more  evident.  In  the  administrative 
branch  additional  work  can  be  provided  for  by  the  ex- 
tension of  existing,  and  the  creation  of  additional,  serv- 
ices. In  the  legislative  branch  this  cannot  be  done;  at 
least  nothing  in  this  way  has  actually  been  done.  The 
situation  is  thus  presented  where  Congress  is  called 
upon  to  consider  and  legislate  regarding  a  constantly 
increasing  variety  of  matters.  These  matters,  more- 
over, no  longer  relate  merely  to  questions  of  general 
political  policy.  For  the  most  part  they  have  to  do  with 
highly  specialized  subjects.  The  task  confronting  Con- 
gress is  thus  one,  not  merely  of  determining  the  general 
policy  of  the  government  in  respect  to  the  performance 
of  its  essential  functions,  but  of  having  to  make  de- 
cisions regarding  matters  which  in  their  variety  and 
scope  embrace  almost  all  fields  of  human  activity.  Fur- 
thermore, after  the  first  decisions  are  made,  Congress  is 
subsequently  under  the  necessity,  annually,  of  consider- 
ing, what  provision  shall  be  made  in  the  way  of  plant, 
organization,  personnel  and  financial  grants  for  the 
support  and  conduct  of  the  machinery  that  has  to  be 
set  up  for  the  enforcement  and  execution  of  the  policies 
decided  upon. 

There  can  be  no  question  that  Congress  is  staggering 
under  this  load.  Notwithstanding  the  fact  that  during 
recent  years  it  has  been  in  almost  continuous  session, 
and  that  the  rules  and  practices  of  both  houses  have  been 

75 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

progressively  modified  with  a  view  to  securing  increased 
dispatch  in  the  conduct  of  its  affairs,  it  is  utterly  unable 
to  handle  with  due  care  and  promptness  even  those 
urgent  matters  regarding  which  there  is  substantial 
agreement  that  action  of  some  sort  should  be  had. 
Finally,  that  this  situation  will  grow  worse  rather  than 
better  is  practically  certain. 

The  foregoing  represents  a  condition  of  affairs  that 
must  give  concern  to  all  persons  interested  in  the  cause 
of  efficient  government.  It  raises  squarely  the  question 
of  what  shall  be  done  to  meet  the  problem  of  adminis- 
tration engendered  by  it.  Matters  cannot  be  allowed  to 
drift  indefinitely,  since,  as  has  been  pointed  out,  the 
situation  tends  constantly  to  become  one  of  increasing 
gravity.  Some  positive  action  of  a  radical  character  is 
required.  It  is  the  purpose  of  this  paper  to  bring  for- 
ward for  consideration  one  form  of  action  which,  in  the 
opinion  of  its  writer,  will  meet  the  problems  here  pre- 
sented. 

Outline  of  Plan.  This  action  consists  in  the  definite 
adoption  by  the  government,  in  making  provision  for  the 
performance  of  both  its  legislative  and  its  administra- 
tive functions,  of  the  principle,  or  device,  of  what  is 
known  as  the  holding  and  subsidiary  corporations  form 
of  organization.  It  contemplates  that  Congress  shall 
look  upon  the  general  government  as  but  a  holding  cor- 
poration of  which  it  is  the  board  of  directors;  that,  as 
such,  Congress  shall  not  seek  directly  to  manage  all  of 
the  affairs  of  government,  but  shall  bring  into  existence 
distinct  subsidiary  corporations  to  direct  and  administer 
the  affairs  of  certain  of  its  special  services.  Essentially 
this  means  that  each  such  service  will  be  given  a  legal, 
administrative  and  financial  autonomy.  Each  will  have 

76 


QUESTION  OF  SUBSIDIARY  BUDGETS 

its  organic  act,  or  charter,  providing  for  its  creation  and 
denning  its  jurisdiction,  powers  and  duties;  its  board  of 
directors ;  its  directing  staff  and  subordinate  personnel ; 
its  own  plant,  equipment  and  other  property  which  it 
will  possess  in  its  own  name;  its  own  revenue  and  ex- 
penditure system;  its  distinct  accounting  and  reporting 
system  separate  from  that  of  the  general  government; 
and  its  own  well-defined  sphere  of  activities.  Each,  in 
a  word,  will  have  all  the  characteristics  of  a  public 
corporation. 

The  legal  relationship  between  these  service  corpora- 
tions and  the  general  government  will  be  precisely  that 
of  municipal  corporations  to  the  commonwealth  creat- 
ing them.  In  their  practical  operations,  however,  the 
status  of  principal  and  agent  as  between  the  general 
government  and  the  incorporated  service  will  be  far 
more  strongly  emphasized.  The  general  government, 
as  principal,  will  concern  itself  with  the  operations  of 
its  agent  in  a  way  that  no  state  does  with  the  operations 
of  its  municipal  corporations.  It  will  require  from  its 
agent, the  most  detailed  and  complete  information  re- 
garding its  operations.  It  will,  of  course,  have  the 
formal  approval  annually  of  its  work  program  and 
budget  of  revenues  and  expenditures.  It  will  stand  back 
of  the  subsidiary  corporation  financially  in  that  it  will 
profit  by  any  surplus  earnings  and  be  responsible  for 
any  deficit  resulting  from  its  operations.  It  will,  in  a 
word,  occupy,  as  regards  current  direction,  supervision 
and  control,  and  direct  financial  interest  in  its  physical 
and  financial  operations,  precisely  the  position  of  the 
private  holding  corporation  towards  its  subsidiary  cor- 
porations. 

Services  Susceptible  of  Treatment  as  Subsidiary  Corpo- 
rations. This  proposal  does  not  by  any  means  con- 

77 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

template  that  all  of  the  administrative  services  of  the 
government  should  be  given  this  status.  The  idea  is 
that  only  certain  ones  should  be  so  treated.  A  study  of 
the  several  services  of  the  government  shows  that  the 
argument  in  favor  of  erecting  them  into  distinct  cor- 
porations is  much  stronger  in  certain  cases  than  in 
others.  In  the  former  category,  first  for  treatment  in 
this  way,  would  be  those  having  an  industrial  and 
revenue-producing  character.  Of  such  the  government 
already  possesses  a  considerable  number:  the  Postal 
>  Service;  the  Panama  Canal;  the  Alaskan  Engineering 
Commission,  to  which  is  entrusted  the  construction  and 
operation  of  a  system  of  railways  in  Alaska;  the 
Bureau  of  War  Risk  Insurance;  and  the  Shipping 
Board.  Each  of  these  represents  a  distinct  activity 
which  has  little  or  no  direct  relation  to  the  general  oper- 
ations of  government.  Each  has  all  the  characteristics 
of  an  ordinary  industrial  or  commercial  enterprise  as 
carried  on  under  private  auspices.  Each  has  its  special 
plant,  equipment  and  personnel,  and  each  has,  or  should 
have,  its  distinct  budget  of  revenues  and  expenditures, 
and  accounting  and  reporting  systems.  Each,  finally, 
in  its  operations,  presents  problems  of  organization  and 
administration  which  are  of  a  purely  non-political  and 
technical  character.  This  list,  moreover,  is  one  to  which 
material  additions  may  be  made  in  the  future.  There 
is  a  demand,  which  is  probably  steadily  growing  in 
strength,  that  the  national  government  take  over  the 
ownership  and  operation  of  such  public  utilities  as  means 
of  radio  communication,  telegraph  and  telephones,  and 
the  railway  system  of  the  country. 

Second  in  order  of  consideration  for  their  possible 
erection  into  subsidiary  corporations  would  be  certain 
services  having  for  their  purpose  the  administration 

78 


QUESTION  OF  SUBSIDIARY  BUDGETS 

or  exploitation  of  the  public  domain:  the  General  Land 
Office;  the  Reclamation  Service;  the  Forest  Service; 
the  National  Parks  Service.  Next  in  order  would  come 
the  great  general  supply  services  and  manufacturing 
plants  of  the  government:  the  Government  Printing  Of- 
fice; the  Bureau  of  Engraving  and  Printing;  the  Office 
of  Supervising  Architect  of  the  Treasury;  the  General 
Supply  Committee;  the  proposed  Nitrate  Plant  and  pos- 
sibly the  Arsenals  and  Navy  Yards.  Among  other  ser- 
vices, the  erection  of  which  into  subsidiary  corporations 
should  receive  special  consideration,  particular  mention 
should  be  made  of  the  Bureau  of  Indian  Affairs  and 
the  Patent  Office. 

Advantages  of  Plan  from  Standpoint  of  Government  as 
a  Whole.  Having  stated  the  proposition,  it  remains  to 
consider  the  advantages  which  it  is  believed  will  flow 
from  its  adoption,  and  to  meet  certain  objections  which 
it  is  to  be  anticipated  will  be  urged  against  it.  In 
seeking  to  do  this,  the  consequence  resulting  from 
putting  this  policy  into  effect  should  be  considered  from 
the  two  standpoints  of  the  holding  corporation,  that  is, 
the  general  government,  and  the  subsidiary  corporation, 
or  the  service  given  this  special  treatment. 

From  the  first  standpoint,  the  most  important  result 
would  be  the  immediate  relief  of  Congress  from  the 
burden  of  having  to  concern  itself  with  the  great  mass 
of  details,  many  of  which  are  of  a  purely  administrative 
and  technical  character,  under  which  it  now  labors  in 
seeking  itself  directly  to  determine  precisely  how  each 
of  these  highly  specialized  services  shall  be  organized, 
manned,  equipped  and  operated.  This  relief  will  mani- 
fest itself  especially  in  respect  to  the  annually  recurring 
necessity  that  Congress  is  now  under  of  considering  in 

79 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

detail  the  appropriations  that  shall  be  voted  for  the  sup- 
port of  the  government.  It  goes  without  saying  that 
under  existing  conditions,  with  the  great  and  constantly 
increasing  magnitude  and  variety  of  work  of  the  gov- 
ernment, either  a  greater  and  greater  amount  of  time 
and  labor  must  be  devoted  by  the  several  appropriation 
committees  to  the  consideration  of  service  estimates  and 
by  Congress  as  a  whole  to  action  upon  its  committees' 
recommendations,  or  this  work  will  be  done  with  con- 
stantly decreasing  care.  Under  the  proposed  plan  the 
greater  part  of  this  burden  will  be  performed  by  the 
boards  of  directors  of  the  several  subsidiary  service 
corporations. 

It  is  of  the  essence  of  the  proposal  that  each  subsidiary 
corporation  shall  have  its  own  distinct  budget.  This 
budget  will  be  prepared  in  substantially  the  same  man- 
ner that  the  budget  of  the  general  government  is,  or 
rather  should  be,  prepared.  Estimates  of  financial  needs 
will  be  prepared  by  the  directing  administrative  staff  of 
the  service  corporation  and  submitted  to  the  board  of 
directors.  The  latter  will  consider  these  estimates  and 
on  their  basis  prepare  a  budget  for  submission  to  Con- 
gress. The  point  may  here  be  made  that,  inasmuch  as 
under  this  plan  Congress  will  still  have  the  obligation 
of  considering  and  acting  upon  this  budget,  it  will  not 
be  relieved  of  any  of  the  responsibility  and  work  under 
which  it  now  rests.  This,  however,  is  not  the  case.  This 
budget,  in  the  first  place,  by  the  mere  fact  that  it  relates 
to  the  operations  of  a  distinct  service  wholly  detached 
from  the  general  financial  operations  of  the  government, 
and  presents  in  one  document  both  revenue  and  expendi- 
ture statements  and  a  balance  sheet,  gets  before  Con- 
gress the  problem  of  making  provision  for  the  service 
iri  question  in  a  far  more  effective  way,  and  one  in  which 

80 


QUESTION  OF  SUBSIDIARY  BUDGETS 

it  can  be  more  easily  handled,  than  if  it  were  presented 
merely  as  a  set  of  items  in  a  general  book  of  estimates. 
If  properly  prepared  it  furnishes  a  complete  and  system- 
atic showing  of  past  operations,  present  conditions  and 
proposals  for  the  future.  This  budget,  moreover,  in- 
stead of  coming  to  Congress  directly  as  an  estimate  pre- 
pared by  the  persons  charged  with  the  administration  of 
the  service,  has  first  been  passed  upon  and  reviewed  by  a 
body  whose  duty  it  is,  acting  as  the  agent  of  Congress, 
to  exercise  a  general  supervision  and  control  over  the 
acts  of  such  administrative  officers.  This  direct  super- 
vision and  control,  moreover,  is  exercised  by  a  body  tech- 
nically qualified  to  pass  upon  the  needs  of  the  service 
and  in  constant  direct  touch  with  its  operations.  Nor- 
mally Congress  can  accept  the  judgment  of  this  body  in 
respect  to  details  and  can  thus  limit  its  own  participa- 
tion to  that  of  considering  the  budget  in  its  general  as- 
pect and  as  involving  matters  of  general  policy  or  of 
major  importance. 

If  all  the  services  having  the  characteristics  which  we 
have  enumerated  as  ones  warranting  their  treatment  as 
separate  corporations  are  treated  in  this  way  a  double 
benefit  will  result.  In  the  first  place  the  problem  of 
adopting  a  financial  and  work  program  for  each  will, 
as  we  have  seen,  come  before  Congress  as  a  separate 
and  distinct  problem.  In  the  second  place  the  general 
problem  of  financing  the  government  will  be  correspond- 
ingly lessened  and  simplified.  The  conviction  is  con- 
stantly gaining  strength  that  the  system  of  financial 
administration  of  the  national  government  should  not 
only  include,  but  rest  squarely  upon,  a  budget,  as  in  all 
other  countries  having  modern  political  institutions. 
The  attempt  to  bring  together  in  one  comprehensive 
statement,  or  set  of  statements,  all  the  resources  and 

81 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

obligations  and  revenues  and  expenditures  of  the  gov- 
ernment, with  estimates  of  the  financial  requirements 
for  the  future  of  all  services  and  all  categories  of  work, 
so  coordinated,  classified  and  analyzed  that  they  may  be 
given  effective  consideration,  is  an  undertaking  of  great 
magnitude  and  difficulty.  Anything  that  will  tend  to 
lessen  or  simplify  this  problem  will  contribute  just  So 
much  to  the  working-out  of  the  general  problem  of  put- 
ting the  administration  of  the  financial  affairs  of  the 
government  generally  upon  a  more  satisfactory  basis. 
With  special  budgets  for  the  subsidiary  service  corpora- 
tions, the  general  budget  will  contain  but  a  single  entry 
in  respect  to  each :  an  entry  on  the  revenue  side,  if  the 
service  produces  a  net  surplus  available  for  payment 
into  the  general  treasury,  or  one  on  the  expenditure  side 
if  there  is  a  deficit  in  operation  that  has  to  be  met  from 
general  funds.  Through  these  entries  the  special  budg- 
ets will  be  tied  to  the  general  budget  and  their  influence 
upon  the  latter  properly  determined. 

It  will  be  noted  that  this  procedure  means  that  to  this 
extent  the  general  budget  will  be  what  is  known  as  a 
net,  instead  of  a  gross,  budget.  As  regards  services  of 
general  administration,  the  gross-budget  principle  is  un- 
doubtedly the  desirable  one.  The  services  which  it  is 
proposed  shall  be  treated  as  subsidiary  corporations  are, 
however,  of  a  different  character.  In  their  case  ex- 
penditure normally  increases  with  the  steady  develop- 
ment of  the  country  or  the  scope  of  their  operations, 
and  is  for  the  most  part  accompanied  by  a  correspond- 
ing increase  in  their  revenues.  Such  increased  expendi- 
tures do  not  represent  an  increase  in  the  cost  of  govern- 
ment proper  in  the  same  way  that  expenditures  for  the 
general  operations  of  government  do.  The  inclusion  in 
the  general  budget  of  only  their  net  results  thus  causes 

82 


QUESTION  OF  SUBSIDIARY  BUDGETS 

the  latter  to  give  a  much  fairer  statement  of  the  prog- 
ress of  real  government  revenues  and  expenditures  than 
if  their  total  revenues  and  expenditures  were  included, 
as  is  the  case  at  the  present  time. 

In  considering  this  matter  of  the  change  that  would 
be  introduced  in  the  method  now  employed  in  making 
provision  for  the  financial  needs  of  the  services,  atten- 
tion should  be  given  to  the  suggestion  made  by  the  pres- 
ent writer  in  another  paper,  that  our  system  of  financial 
administration  should  make  provision  for  the  sub-allot- 
ment of  appropriations  to  specific  purposes  or  sub- 
divisions of  a  service  by  executive  officials.1  This  pro- 
posal, in  brief,  is  that  Congress  make  its  appropriations 
under  general  heads  and  entrust  to  the  executive  officials 
having  their  expenditure  the  sub-appropriation  or  allot- 
ment of  these  funds  to  more  specific  purposes.  To  in- 
sure proper  action  by  these  officials,  and  effective  control 
over  them,  the  project  carries  with  it  the  requirement 
that  these  officers  shall  make  their  allotments  in  as  for- 
mal a  manner  as  Congress  does  in  making  its  appropria- 
tions; that  accounts  be  opened  up  with  each  allotment; 
and  that  full  report  be  made  to  Congress  of  the  manner 
in  which  appropriations  are  allotted,  all  transfers  ef- 
fected between  allotment  heads,  and  expenditures  under 
these  allotments.  The  ends  sought  by  this  proposal  are : 
the  relief  of  Congress  from  the  consideration  of  details 
of  appropriations;  the  vesting  of  the  fixing  of  these 
details  in  the  heads  of  offices  personally  familiar  with 
the  needs  of  the  services  and  responsible  for  their  con- 
duct; and  the  making  more  flexible  of  the  present 
extremely  rigid  system  of  appropriation  as  regards 

1  "Allotment  of  Funds  by  Executive  Officials  an  Essential  Feature 
of  any  Correct  Budgetary  System."  Proceedings  of  the  American 
Political  Science  Association,  1912.  Reprinted  as  Chapter  VII  of  the 
present  volume. 

83 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

their  expenditure;  while  at  the  same  time  taking  every 
precaution,  through  the  requirements  of  a  formal  pro- 
cedure for  the  keeping  of  accounts  and  the  rendering  of 
reports,  that  accountability  on  the  part  of  the  allotting 
and  expending  officers  is  ensured  and  final  control  by 
Congress  preserved  unimpaired.  Mention  is  made  of 
this  proposal,  since  it  is  evident  that  the  system  of  sub- 
ordinate service  corporations  would  lend  itself  to  its 
employment.  Congress  would  have  the  duty  of  making 
appropriations  under  general  heads  while  the  sub-allot- 
ment of  these  appropriations  would  be  performed  by  the 
boards  of  directors  of  the  service  corporations. 

Another  important  merit  of  the  service-corporation 
plan  of  organization  is  that  it  would  promote  in  a  very 
material  way  the  exceedingly  desirable  end  of  taking  the 
purely  business  and  technical  services  of  the  government 
outside  of  the  domain  of  politics.  The  mere  fact  of  sep- 
arating the  organization  and  operations  of  these  services 
from  those  of  the  government  generally  would  tend  to 
emphasize  their  non-political  character,  and  make  it 
easier  to  resist  political  pressure  in  respect  to  both  their 
work  and  their  personnel.  The  experience  of  the  Inter- 
state Commerce  Commission  demonstrates  that  it  is 
quite  possible  to  bring  into  existence  a  subordinate  body 
having  the  general  character  of  a  service  board  of  direc- 
tors that  will  eliminate  from  its  action  all  political  con- 
siderations. No  small  advantage  of  the  proposal  is  the 
extent  to  which  it  would  promote  or  facilitate  the  course 
of  civil-service  reform  and  the  principle  of  putting  the 
business  branches  of  government  upon  a  purely  business 
basis. 

Advantages  of  Plan  from  Standpoint  of  the  Individual 
Services.  Having  considered  the  proposal  for  the  estab- 


QUESTION  OF  SUBSIDIARY  BUDGETS 

lishment  of  service  corporations  in  its  more  general 
aspects,  it  remains  to  consider  what  would  be  the 
effects  of  this  policy  upon  the  services  themselves. 
Viewed  from  this  standpoint,  there  can  be  no  serious 
question  that  these  effects  would  be  wholly  beneficial. 
Foremost  among  these  advantages  would  be  the  extent 
to  which  it  would  tend  to  erect  each  service  so  treated 
into  one  offering  a  special  career  to  members  of  its  per- 
sonnel. A  prime  characteristic  of  these  services  is  the 
extent  to  which  they  call  for  employees  possessing  tech- 
nical, as  opposed  to  general  clerical  and  administrative 
qualifications.  If  competent  men  are  to  be  found  for 
these  positions,  and  retained  in  them,  it  is  imperative 
that  such  men  shall  not  only  be  paid  an  adequate  com- 
pensation, but  be  afforded  an  opportunity  for  advance- 
ment in  their  chosen  profession.  This  can  be  done  only 
when  the  technical  personnel  of  each  service  is  carefully 
classified  and  a  satisfactory  promotion  system  devised 
and  operated.  It  is  notorious  that,  at  the  present  time, 
neither  of  these  conditions  is  adequately  met  in  the  ad- 
ministrative services  of  the  national  government.  The 
salaries  paid  to  technical  employees,  or  at  least  to  those 
of  higher  rank,  are  far  below  those  paid  to  correspond- 
ing employees  in  private  undertakings.  In  exceptional 
cases  only  are  these  employees  satisfactorily  classified, 
is  the  range  of  compensation  wide  enough,  or  are  proper 
promotion  systems  used.  But  few  services  of  the  gov- 
ernment thus  offer  anything  like  an  attractive  career  to 
young  men  of  ability,  technical  attainments  and  ambi- 
tion.1 It  is  not  contended  that  these  conditions  cannot 

1  The  military  and  naval  services  constitute  notable  exceptions  to 
this  statement.  Among  purely  civil  services  the  nearest  approach  to 
satisfactory  conditions  in  this  respect  is  to  be  found  in  the  corps  of 
examiners  in  the  Patent  Office  and  the  medical  corps  in  the  Public 
Health  Service  of  the  Treasury  Department.  These  exceptions  but 

85 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

be  attained  under  the  present  organization  of  the  admin- 
istrative service.  It  is  maintained,  however,  that  the 
work  of  meeting  these  conditions  will  be  greatly  facili- 
tated by  the  proposal  here  made  that  these  technical 
services  be  erected  into  administrative  entities,  the  im- 
mediate control  of  whose  affairs  will  be  in  a  technically 
qualified  board. 

Second,  the  giving  to  each  of  these  services  a  distinct 
'life  of  its  own  cannot  but  tend  to  promote  the  develop- 
ment of  an  esprit  de  corps  and  interest  in  the  service  on 
the  part  of  its  personnel  that  is  not  always  now  present. 
All,  from  the  highest  officer  to  the  lowest  employee,  will 
know  that  any  benefits  resulting  from  increased  econ- 
omy in  the  expenditure  of  funds,  from  increased  effi- 
ciency in  the  performance  of  duties,  or  from  securing 
increased  revenue,  will  accrue  directly  to  the  service 
instead  of  to  a  general  organization  and  treasury  in 
which  it  has  but  little  direct  interest.  At  the  present 
time  each  service  occupies  the  position  toward  the  gen- 
eral treasury  of  a  claimant  seeking  to  get  all  it  can  and 
having  no  direct  interest  in  the  sum  that  it  turns  in.  It 
feels  that  it  is  but  one  of  a  number  of  claimants;  that 
any  curbing  of  its  demands  means  only  that  more  re- 
mains for  other  services ;  that  if  it  seeks  to  effect  such 
savings  as  those  secured  by  the  sale  of  equipment  and 
supplies  no  longer  needed  by  it,  it  will  in  no  wise,  profit 
since  the  proceeds  will  be  turned  into  the  general  treas- 
ury as  miscellaneous  receipts  for  which  it  will  receive 
little  or  no  credit.  Under  the  proposed  plan  all  of  its 
demands  will  be  demands  upon  its  own  funds  and  all 
revenues  will  accrue  to  its  own  treasury.  The  incentive 
to  increase  revenue  receipts  and  to  keep  down  expenses, 

serve  to  demonstrate  the  need  for  similar  conditions  in  respect  to  the 
technical  personnel  of  all  the  services  of  the  government. 

86 


QUESTION  OF  SUBSIDIARY  BUDGETS 

to  practice  economy,  and  generally  to  conduct  affairs  in 
an  efficient  manner,  cannot  but  be  far  greater  than  it  is 
under  existing  conditions. 

In  respect  to  the  actual  work  of  administration  the 
proposed  plan  will  mean  that  the  current  direction  of 
affairs  will  be  in  the  hands  of  a  body  which  cannot  fail 
to  be  technically  better  qualified  for  this  work  than  Con- 
gress. This  will  be  due,  in  the  first  instance,  to  the  fact 
that  the  members  of  the  corporation's  board  presumably 
will  be  selected  with  special  reference  to  their  qualifica- 
tions for  their  positions.  Their  competence  in  this  re- 
spect will  steadily  increase  as  they  gain  familiarity  with 
their  duties  and  experience  in  their  exercise.  Finally, 
they  will  have  but  one  distinct  class  of  duties  to  perform, 
while  members  of  Congress  are  called  upon  to  act  upon 
matters  of  a  wide  range. 

A  further  fact  of  importance  is  that  they  will  exercise 
their  duties  continuously  and  with  a  freedom  of  action 
that  is  impossible  for  Congress.  Congress  is  in  session 
only  part  of  the  time.  While  it  is  in  session,  only  a  small 
part  of  its  time  can  be  devoted  to  the  affairs  of  any  one 
service.  When  it  does  act  it  can  do  so  only  through  the 
laborious  process  of  legislation.  Action  once  taken  can 
be  modified  or  corrected  only  after  great  delay  and  with 
much  difficulty.  As  contrasted  with  this,  the  board  of 
directors  of  a  service  corporation  is,  so  to  speak,  in  con- 
tinuous session.  In  reaching  decisions  it  can  avail  itself 
of  the  knowledge  and  judgment  of  the  working  staff  of 
the  service,  to  a  degree  that  Congress  finds  it  difficult  to 
do.  Decisions  once  made  can  be  promptly  amended  or 
revised  as  experience  dictates.  Action  which  often  re- 
quires months  or  years  to  secure  from  Congress  can  be 
taken  at  once.  Flexibility  will  replace  the  rigidity  which 

87 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

characterizes  the  present  system  of  congressional  direc- 
tion of  details. 

Another  most  important  advantage  of  the  proposed 
plan  is  that  each  service  so  treated  will  be  put  in  a  posi- 
tion where  it  can  work  out  and  operate  an  accounting 
and  reporting  system  adapted  to  its  special  needs.  It  is 
an  open  question  whether  the  attempt  should  be  made  to 
apply  generally  to  government  operations  principles  of 
accounting  and  reporting  such  as  obtain  in  private  un- 
dertakings. There  can  be  no  question,  however,  that, 
as  regards  all  those  government  services  whose  opera- 
tions are  of  an  industrial  or  commercial  character,  every 
effort  should  be  made  to  install  accounting  and  reporting 
systems  corresponding  to  the  most  approved  principles 
and  procedure  of  modern  practice.  This  means  that  such 
systems  should  provide  for  proprietary  as  well  as  operat- 
ing accounts,  the  use  of  balance  sheets,  and,  as  far  as 
circumstances  will  permit,  systems  for  the  determina- 
tion of  costs.  The  problem  of  a  proper  system  of  pro- 
prietary accounts  and  of  cost  keeping  is  a  special  one 
for  each  service.  It  is  consequently  difficult  to  work  out 
such  a  system  for  a  service  unless  it  has  substantial 
financial  autonomy.  Criticism  in  respect  to  the  higher 
cost  of  government  management  in  comparison  with 
that  of  private  undertakings  has  to  do  chiefly  with  those 
activities  of  the  government  which  are  of  an  industrial 
or  commercial  character.  It  is  of  the  utmost  importance 
that  the  government  should  so  keep  the  accounts  of  its 
activities  of  this  character  that  accurate  comparison  of 
these  costs  with  those  of  corresponding  or  analogous 
work  being  done  under  private  auspices  can  be  estab- 
lished. Without  such  knowledge,  it  is  impossible  for 
Congress  and  the  public  to  determine  the  efficiency  with 
which  these  operations  are  being  carried  on,  or  to  frame 

88 


QUESTION  OF  SUBSIDIARY  BUDGETS 

policies  in  respect  to  the  extension  or  curtailment  of 
work  and  the  entering  of  new  fields  of  activity. 

All  that  has  been  said  regarding  the  industrial  serv- 
ices of  the  government  applies  with  equal  force  to  the 
general  supply  departments — the  Government  Printing 
Office,  the  Bureau  of  Engraving  and  Printing,  and  the 
General  Supply  Committee,  should  that  body  be  erected 
into  a  fully  developed  supply  service  instead  of  being, 
as  it  now  is,  nothing  more  than  a  general  contracting 
board.  These  services  raise  the  interesting  question  of 
the  relations  that  should  exist  between  the  several  serv- 
ice corporations  and  between  them  and  the  other  services 
of  the  government.  Many  cases  present  themselves 
where  it  is  desirable  that  one  service  shall  make  use  of 
the  property  or  services  of  another.  In  all  such  cases 
the  relation  should  be  precisely  that  of  one  private  cor- 
poration to  another.  The  service  permitting  the  use  of 
its  property  by,  or  rendering  service  for,  another  service 
should  make  a  proper  charge  for  the  same,  and  com- 
pensation should  be  made  either  by  a  transfer  of  cash 
or  by  a  corresponding  transfer  on  the  books  of  the  treas- 
ury. Under  the  plan  proposed  these  relations  between 
the  several  services  can  be  handled  equally  as  effectively 
as  under  existing  conditions,  and  the  real  revenue  and 
cost  of  the  several  services  can  be  more  accurately 
determined. 

Another  consideration  that  will  have  to  be  met  is  that 
of  making  provision  for  the  capital  outlay  of  services 
requiring  expenditures  of  this  character  beyond  the  re- 
sources of  their  current  revenues.  In  Great  Britain  this 
point  is  handled  by  the  general  treasury  making  what 
are  in  effect  loans  to  the  several  services,  or  by  the  issue 
of  bonds  to  the  public,  which  loans  are  amortized  by 
annual  payments  by  the  services,  such  payments  consti- 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

tuting  items  in  their  annual  budgets.  This  would  seem 
to  be  an  excellent  method  of  meeting  this  point. 

Relation  of  Boards  of  Directors  of  Service  Corporations 
to  Congress.  In  seeking  as  we  have  to  point  out  what 
appear  to  be  the  advantages  in  the  foregoing  pro- 
posal, sight  is  not  lost  of  the  fact  that  the  attempt 
to  put  this  plan  into  execution  will  raise  a  number 
of  questions  offering  no  small  difficulties  of  solution. 
Among  these  the  most  important  will  be  that  of  fixing 
the  precise  relation  of  the  boards  of  directors  of  service 
corporations  to  Congress.  In  respect  to  this  it  should 
be  established  in  the  most  definite  way  that  no  abdica- 
tion of  authority  on  the  part  of  Congress  is  contem- 
plated. That  authority  not  only  must  remain  unim- 
paired but  must  be  currently  exercised.  The  problem  is 
purely  one  of  Congress  delegating  the  exercise  of  this 
authority  to  a  subordinate  body  without  divesting  itself 
of  either  its  general  responsibility  or  its  power  to  exer- 
cise such  general  direction,  supervision  and  control  over 
the  actual  conduct  of  the  affairs  of  government  as  cir- 
cumstances render  desirable.  Direction,  supervision 
and  control  over  operations  may  be  exercised  in  two 
ways:  by  specifying  in  advance  precisely  what  a  sub- 
ordinate agent  may  do,  what  organizations  it  shall  have, 
and  what  procedure  it  shall  follow,  or  by  giving  to  such 
agent  a  more  general  power  of  attorney,  but  at  the  same 
time  taking  full  care  that  accurate  record  and  report  are 
made  by  it  of  precisely  how  this  power  is  exercised.  At 
the  present  time  Congress  relies  largely  on  the  first 
method.  The  present  proposition  carries  with  it  the 
assumption  that  chief  reliance  will  be  placed  upon  the 
second.  It  is  imperative,  therefore,  that,  if  service  cor- 
porations are  set  up,  careful  provision  shall  be  made  that 

90 


QUESTION  OF  SUBSIDIARY  BUDGETS 

approved  methods  of  accounting  are  employed,  and  that 
the  reports  to  be  rendered  shall  be  of  such  a  character 
as  to  permit  Congress  at  all  times  to  see  how  operations 
are  being  conducted  by  its  agents.  It  is  recognized  that 
great  difficulty  will  be  encountered  in  getting  the  con- 
sent of  Congress  to  the  surrender  of  its  present  imme- 
diate control  over  the  operations  of  these  services.  In 
fact,  however,  with  the  growing  work  of  government  this 
surrender  must  be  made  in  some  way,  and,  as  this  is  so, 
the  form  here  suggested,  through  the  establishment  of 
service  corporations,  is  the  most  effective  way  of  accom- 
plishing this  surrender. 

Principle  of  Subsidiary  Service  Corporations  Already 
Adopted  by  Congress  for  Territorial  Services.  In  this 
connection  it  is  important  to  note  that  the  action  here 
proposed  is  neither  so  novel  nor  so  revolutionary  as 
might  at  first  sight  appear.  We  have  already  pointed 
out  that  this  is  substantially  what  a  state  does  when  it 
establishes  municipal  and  other  local  corporations, 
boards  of  education,  health,  charity,  corrections,  etc.  A 
still  more  direct  illustration  of  the  actual  adoption  of 
this  proposal  is,  however,  offered  by  the  national  gov- 
ernment itself.  This  consists  in  the  provision  made  by 
Congress  for  the  government  of  the  District  of  Colum- 
bia, the  Philippines,  Porto  Rico  and  the  territories  and 
dependencies  generally.  The  administration  of  the  af- 
fairs of  these  territories  is  as  direct  an  obligation  on 
the  part  of  Congress  as  that  of  the  operation  of  the 
Panama  Canal,  the  construction  and  operation  of  a  rail- 
way system  in  Alaska,  or  the  conduct  of  the  postal  serv- 
ice in  this  country.  Its  legal  relation  to  both  these 
classes  of  undertakings  is  precisely  the  same.  It  can,  if 
it  choose,  administer  their  affairs  directly,  as  it  can  bring 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

into  existence  subordinate  bodies  and  delegate  to  them 
immediate  responsibility,  reserving  to  itself  the  superior 
direction,  supervision  and  control.  In  the  case  of  the 
dependencies,  Congress  has  done  precisely  what  it  is  here 
urged  it  should  do  in  the  case  of  these  services  of  the 
government  which  have  distinct  spheres  of  activities  un- 
connected with  the  general  operations  of  government, 
which  are  in  possession  of  their  own  income,  and  in 
respect  to  which  motives  of  economy  and  efficiency  would 
seem  to  dictate  that  they  be  treated  as  separate  entities 
by  having  conferred  upon  them  the  largest  possible 
measure  of  legal,  administrative  and  financial  autonomy. 
Each  of  these  territories  has  been  erected  into  a  sub- 
sidiary corporation,  with  its  own  property,  revenues, 
expenditures,  accounting  and  reporting  system,  its  own 
board  of  directors,  administrative  staff  and  personnel 
distinct  from  those  of  the  general  government.  Each 
has  had  granted  to  it  large  authority  to  manage  its  own 
affairs.  In  making  this  large  delegation  of  powers  Con- 
gress has  in  no  respect  lessened  its  own  power  to  act  at 
any  time  when  it  sees  fit  to  do  so,  or  relieved  itself  from 
its  general  responsibility.  At  any  time  it  can  enact  legis- 
lation modifying  the  charter  or  organic  act  of  the  sub- 
sidiary corporation.  It  is  always  free  to  pass  acts  re- 
garding the  conduct  of  affairs  in  such  dependencies,  even 
though  such  affairs  are  within  the  scope  of  powers  of 
the  dependencies.  All  acts  of  such  subordinate  corpora- 
tions, moreover,  must  be  reported  to  Congress,  and  the 
latter  can  at  any  time  modify  them  or  set  them  aside. 
Careful  provision  is  made  that  each  such  subordinate 
corporation  shall  keep  an  account  of  its  financial  and 
other  operations  and  make  report  annually  regarding 
them,  to  the  end  that  Congress  shall  always  be  in  a  posi- 

92 


QUESTION  OF  SUBSIDIARY  BUDGETS 

tion  to  know  how  affairs  are  being  conducted  by  its 
agents. 

Regarding  the  success  of  this  policy  there  can  be  no 
question.  A  study  of  the  problem  of  colonial  govern- 
ment and  of  the  experience  of  the  various  nations  having 
colonial  systems,  in  respect  to  the  policies  pursued  by 
them  in  the  administration  of  the  affairs  of  their  de- 
pendencies, shows  that  no  greater  mistake  can  be  made 
by  the  central  government  than  to  attempt  itself  directly 
to  manage  the  affairs  of  such  territories  or  to  refuse  to 
give  to  them  substantial  autonomy  in  respect  at  least  to 
their  financial  operations.  In  no  small  degree  the  suc- 
cess of  Great  Britain  and  the  United  States  in  the  man- 
agement of  their  colonial  possessions,  in  comparison 
with  that  of  other  nations,  is  due  to  the  greater  extent 
to  which  this  policy  has  been  pursued  by  them. 

Novelty  of  Present  Proposed  Application  of  This  Prin- 
ciple to  Functional  Services.  It  will,  of  course,  not  es- 
cape notice  that  in  these  cases  we  have  an  example 
of  the  use  of  the  principle  of  subsidiary  corporations  for 
the  purpose  of  effecting  a  distribution  or  delegation  of 
governmental  powers  territorially,  while  what  is  pro- 
posed in  this  paper  is  the  application  of  this  principle  to 
the  distribution  or  delegation  of  powers  functionally. 
It  is  this  distinction  which  gives  to  this  proposal  its 
novel  character.1  Notwithstanding  the  importance  of 
this  distinction,  the  principle  involved  is  in  both  cases 
the  same,  and  it  is  difficult  to  see  why  it  is  not  of  equal 
applicability  to  a  functional  service  provided  that  serv- 

1  As  regards  the  novelty  of  this  proposal  it  should  be  noted  that  the 
individual  states  have  in  many  cases  adopted  substantially  the  plan 
here  proposed  in  providing  for  the  administration  of  certain  of  their 
functional  services.  Reference  is  made  especially  to  the  creation  of 
their  state  universities  into  distinct  corporations. 

93 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

ice  has  a  distinct  sphere  of  activities  outside  the  general 
duties  of  government,  and  possesses  the  other  attributes 
which  we  have  pointed  out  as  ones  which  should  be  given 
weight  in  selecting  the  service  for  treatment  in  this  way. 

In  regard  to  this  point  it  is,  moreover,  of  importance 
to  suggest  that  the  government,  while  not  adopting  the 
policy  of  creating  subsidiary  corporations  of  a  func- 
tional character  as  a  deliberate  policy,  as  it  has  done  in 
the  case  of  territorial  administration,  has,  nevertheless, 
already  made  steps  in  this  direction.  One  of  the  most 
significant  features  of  recent  action  by  Congress  in  the 
erection  of  services  for  the  conduct  of  new  lines  of 
activities  assumed  by  the  government,  is  the  extent  to 
which  the  board  or  commission  form  of  organization 
has  been  adopted  instead  of  the  bureau  form,  where 
direct  powers  of  administration  are  vested  in  a  single 
bureau  chief.  A  study  of  the  organic  acts  for  these 
services — the  Interstate  Commerce  Commission,  the 
Federal  Trade  Commission,  the  Federal  Reserve  Board, 
the  Federal  Farm  Loan  Board,  the  United  States  Em- 
ployees' Compensation  Commission,  the  Alaskan  Engi- 
neering Commission,  and  the  Shipping  Commission — 
shows  that  large  powers  of  subsidiary  legislation  in  the 
way  of  board  or  commission  orders  and  of  determining 
administrative  organization  and  procedure  through 
board  or  commission  rules  and  regulations  have  been 
conferred  upon  them.  Certain  of  these  services  have, 
it  is  true,  been  given  this  form  of  organization  princi- 
pally because  the  character  of  the  work  to  be  performed 
by  them  partakes  of  a  quasi-legislative  or  quasi-judicial' 
character.  This,  however,  is  not  so  in  all  cases. 

Though  the  establishment  of  these  boards  and  com- 
missions may  be  regarded  as  a  step  toward  the  adoption 
of  the  policy  of  creating  subordinate  corporations  of  a 

94 


QUESTION  OF  SUBSIDIARY  BUDGETS 

functional  character,  it  nevertheless  lacks  the  essential 
character  of  such  a  policy  in  that  in  no  case  are  such 
services  erected  into  entities  autonomous  from  the 
standpoint  of  organization,  personnel,  property  or 
finance.  They  are  mentioned  here  merely  as  evidence 
that  Congress  has  recognized  the  necessity  of  delegating 
the  exercise  of  a  portion  of  its  authority  to  subordinate 
bodies.  Though  obtaining  a  certain  relief  in  this  way, 
it  has  been  far  from  obtaining  the  relief  that  it  would 
get  were  it  whole-heartedly  to  act  upon  the  policy  of 
establishing  fully  autonomous  subsidiary  corporations. 

Adoption  of  Proposed  Plan  Should  Be  Gradual.  In  con- 
clusion, it  may  be  noted  that  the  policy  proposed  not 
only  may,  but  probably  should,  be  put  into  effect  grad- 
ually. A  start  might  be  made  with  some  one  service, 
such  as  the  Alaskan  Engineering  Commission  or  the 
Panama  Canal.  On  the  basis  of  the  experience  thus 
gained,  the  policy  could  be  progressively  extended  to  the 
other  services  of  the  character  described. 


CHAPTER  VI 

THE  CORRELATION  OF  THE  ORGANIZATION 
OF  CONGRESS  AND  THAT  OF  THE  EXECU- 
TIVE FOR  BUDGETARY  PURPOSES  x 

No  misconception  in  respect  to  the  organization  of 
the  state,  and  of  the  functions  of  the  various  parts  of  its 
governmental  machinery,  is  more  prevalent  than  that 
the  national  assembly — the  parliament,  the  congress,  the 
legislative  chambers,  as  the  case  may  be — is  simply,  or 
primarily,  a  body  for  the  formulation  and  passage  of 
general  laws  for  the  determination  of  the  rights  and 
duties  of  the  citizen  body  for  which  it  acts.  The  enact- 
ment of  public  laws  of  this  character  is  undoubtedly  one 
of  its  functions,  and,  it  need  scarcely  be  said,  an  ex- 
ceedingly important  one.  That  it  is  not  its  sole  func- 
tion, indeed,  is  not  the  one  making  the  largest  draft  upon 
its  time,  is  at  once  apparent  if  the  attempt  is  made  to 
analyze  the  work  really  done  by  it. 

The  Functions  of  Congress  as  a  Board  of  Directors. 

From  the  governmental  standpoint,  the  primary  func- 
tion of  the  legislature  is  to  determine,  subject  to  consti- 
tutional limitations,  how  the  government,  and  particu- 
larly the  executive  branch  of  the  government,  shall  be 
organized,  what  work  shall  be  undertaken,  how  such 
work  shall  be  performed,  what  sums  of  money  shall  be 
applied  to  such  purposes,  and  how  this  money  shall  be 

1  Reprinted  from  the  Proceedings  of  the  American  Political  Science 
Association,  1913-1914. 

96 


CORRELATION  FOR  BUDGETARY  PURPOSES 

raised  and  disbursed.  From  this  standpoint,  the  legis- 
lature is  the  board  of  directors  of  the  public  corpora- 
tion. Representing,  and  acting  for,  the  citizen  stock- 
holders, it  is  its  function  to  give  orders  to  the  executive 
and,  as  a  correlative  and  necessary  function,  to  take  such 
action  as  will  enable  it  at  all  times  to  exercise  a  rigid 
supervision  and  control  over  the  latter  with  a  view  to 
seeing  that  its  orders  are  properly  and  efficiently  car- 
ried out. 

Manifestly,  this  function  is  quite  distinct  from  that  of 
acting  as  a  law-making  body  strictly  speaking.  The 
failure  on  the  part  of  the  public,  indeed  of  the  legisla- 
ture itself,  to  recognize  clearly  this  dual  role  of  the  legis- 
lature is  due,  in  great  part,  to  the  fact  that  the  legisla- 
ture in  performing  its  two  functions  proceeds  in  identi- 
cally the  same  way,  makes  use  of  the  same  scheme  of 
organization,  and  embodies  its  action  in  the  same  char- 
acter of  document  in  the  one  case  that  it  does  in  the 
other.  It  is  unfortunate  that  the  same  designation, 
"laws"  or  "statutes,"  is  given  to  both  classes  of  enact- 
ments. The  two  have  almost  nothing  in  common.  Laws, 
from  the  juristic  standpoint,  have  to  do  with  rights, 
duties  and  remedies  and  the  manner  of  their  enforce- 
ment. They  are  general  and  permanent  in  character. 
Enactments  for  the  purpose  of  giving  directions  to 
officers  of  the  government  are,  for  the  most  part,  but 
administrative  orders.  The  major  part  of  them  have 
only  a  temporary  end  in  view.  Of  this  character  are 
the  annual  or  biennial  appropriation  acts,  the  acts  au- 
thorizing the  construction  of  a  bridge  or  public  building, 
etc.  Had  the  custom  developed  of  giving  to  such  acts  a 
special  designation  and  of  segregating  and  publishing 
them  separately,  not  only  would  a  great  convenience  be 
subserved,  but  the  different  character  of  functions  per- 

97 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

formed  by  the  legislature  would  be  made  more  clearly 
apparent. 

This  distinction  between  the  two  functions  of  the 
legislature — that  of  acting  as  a  law-making  body  and 
that  of  acting  as  a  board  of  directors — is  important  in 
any  legislative  body.  It  is  especially  so  in  respect  to  our 
national  Congress.  Under  our  constitutional  system, 
many  of  the  great  fields  of  public  legislation  are  exclu- 
sively or  predominantly  within  the  jurisdiction  of  the 
several  states.  Debarred  from  these  fields,  Congress 
has  but  a  comparatively  restricted  territory  within  which 
to  exercise  its  function  as  a  general  legislator.  One  has 
but  to  follow  the  proceedings  of  Congress,  or  attempt  to 
measure  its  work,  as  expressed  in  the  session  laws,  to 
realize  that  the  bulk  of  its  activities  is  performed,  not 
in  the  legislative  field,  but  in  that  of  "running  the  gov- 
ernment," using  that  term  in  the  most  restricted  sense 
in  which  it  may  be  employed.  Thus,  for  example,  little 
pretense  is  made  during  the  short  sessions  of  Congress 
to  do  other  work  than  that  of  the  passage  of  the  regular 
appropriation  acts. 

Failure  of  Congress  to  Organize  with  Reference  to  the 
Performance  of  This  Function.  The  foregoing  may  ap- 
pear to  be  an  indirect  way  of  approaching  the  sub- 
ject to  which  this  paper  relates.  Not  the  first  advance, 
however,  can  be  made  toward  the  solution  of  the 
problem  here  being  considered  until  this  distinctive 
character  of  the  work  of  Congress  as  a  part  of  the 
mechanism  for  the  day-to-day  conduct  of  public  affairs 
is  clearly  recognized.  Efficient  organization  and  meth- 
ods of  procedure  can  only  be  secured  where  the  end 
sought,  the  work  to  be  performed,  is  kept  clearly  in 
view,  and  a  corresponding  choice  of  devices  is  made. 

98 


CORRELATION  FOR  BUDGETARY  PURPOSES 

Is  Congress  so  organized  and  its  rules  of  procedure  so 
formulated?  Has  Congress  appreciated  that  its  func- 
tion as  a  board  of  directors  is  quite  distinct  from  its 
function  as  a  general  lawgiver  and  as  such  requires  a 
different  organization? 

We  may,  I  think,  answer  both  of  these  questions  in 
the  negative.  Congress  performs  its  work  as  a  direct- 
ing and  supervising  board  very  inefficiently.  It  not  only 
has  made  no  attempt  to  organize  specially  with  a  view 
to  the  discharge  of  its  duties  in  this  field,  but  it  does  not 
even  appreciate  that  it  has  here  a  special  problem  to  be 
met.  With  two  different  functions  to  perform,  it  has 
organized  and  adopted  rules  with  only  one  of  them  in 
mind.  We  have  thus  here  at  the  outset  an  explanation, 
and  that  a  fundamental  one,  of  why  Congress  does  its 
governing  work  so  poorly.  It  is  our  hope  in  the  follow- 
ing pages  to  establish  this  assertion  more  clearly,  and  to 
suggest  at  least  one  method  by  which  improvement  may 
be  wrought. 

Under  our  scheme  of  government,  not  only  is  a  clear 
distinction  made  between  the  functions  of  authorizing, 
directing,  financing  and  supervising,  on  the  one  hand, 
and  executing,  on  the  other,  but  a  separate  organ  is  pro- 
vided for  the  performance  of  each.  Though  thus  clearly 
distinguished,  the  two  have  a  common  end — the  conduct 
of  the  practical  operations  of  government.  Having  such 
a  common  end,  it  is  imperative  that  the  two  organs  for 
the  performance  of  these  functions,  though  separate, 
should  nevertheless  be  deemed  to  be  integral  and  inti- 
mately related  parts  of  one  piece  of  mechanism.  To 
this  end  it  is  essential  that  the  two,  both  as  regards  their 
organization  and  their  rules  of  procedure,  should  be 
based  upon  or  follow  the  same  principles.  If  they  do 
not,  they  will  not  articulate.  Instead  of  constituting 

99 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

integrated  or  smoothly  geared  parts  of  one  mechanism, 
they  will  be  but  disconnected  pieces  of  machinery,  each 
working  not  only  independently  of  the  other,  but  often 
at  cross-purposes.  That  under  such  a  condition  of  af- 
fairs loss  of  efficiency,  if  not  constant  friction,  will  be 
the  result  is  inevitable. 

Unfortunately  this  primary  condition  for  efficiency 
has  been  utterly  ignored  in  our  national  government. 
In  organizing  for  the  performance  of  its  function  of 
running  the  governmental  machine,  Congress  has  dis- 
regarded almost  wholly  the  organization  that  it  has  pro- 
vided for  the  executive.  To  the  latter  it  has  given  a 
scheme  of  organization  corresponding  in  a  rough  way 
to  the  categories  of  work  to  be  done.  The  executive  has 
been  first  divided  into  fourteen  primary  units:  the  ten 
departments,  state,  treasury,  war,  justice,  post  office, 
navy,  interior,  agriculture,  commerce,  and  labor,  and  the 
four  so-called  independent  establishments;  civil  service 
commission,  interstate  commission,  Smithsonian  Institu- 
tion, and  isthmian  canal  commission.1  Each  of  these 
departments  and  establishments  has  been  further  sub- 
divided into  bureaus  and  these  in  turn  into  a  succession 
of  subordinate  units.  This  successive  subdivision  of  the 
executive  branch  of  the  government  is  supposed  to  cor- 
respond to  a  logical  subdivision  of  the  field  to  be  covered. 
Whether  it,  in  fact,  represents  the  most  advantageous 
apportionment  of  work  to  be  done,  or  grouping  of  serv- 
ices, is  another  question  which  we  hope  to  consider  at 
another  time.  The  only  point  which  it  is  desired  to 
bring  out  is  that  here  is  a  perfectly  definite  classifica- 
tion and  distribution  of  work.  A  particular  department 

lrThe  Government  Printing  Office  and  the  Library  of  Congress, 
though  independent  of  the  departments,  are  properly  parts  of  the 
legislative  branch  of  the  government  since  they  are  under  the  direct 
control  of  Congress. 

100 


CORRELATION  FOR  BUDGETARY  PURPOSES 


is  made  responsible  for  a  particular  class  of  work,  and 
within  such  departments  are  bureaus  and  divisions 
carrying  the  principle  of  specialization  and  location  of 
authority  still  further. 

This  scheme  of  organization,  as  has  been  said,  has 
been  wholly  ignored  by  Congress  in  itself  organizing  for 
the  performance  of  its  share  of  the  work.  Taking  the 
House  of  Representatives  as  an  example,  we  may  distin- 
guish three  classes  of  committees:  the  committees  on 
general  legislation,  the  committee  on  appropriations  and 
the  committees  on  expenditures  in  the  several  depart- 
ments. Under  this  scheme,  as  operated,  one  committee 
has  responsibility  for  the  enacting  of  new  legislation; 
that  is,  of  directing  what  work  shall  be  undertaken,  what 
character  of  organization  shall  be  provided,  what  shall 
be  the  provision  in  the  way  of  plant,  equipment  and  per- 
sonnel that  shall  be  employed,  etc.  Another  committee 
has  responsibility  for  determining  the  amount  of  money 
that  each  year  shall  be  available  for  doing  this  work. 
A  third  committee  attempts  in  a  spasmodic  and  in- 
effectual way  to  examine  into  the  manner  in  which  this 
money  is  spent.  Even  this  crude  theory  of  organization 
is  not  consistently  carried  out.  In  some  cases  the  same 
committee  has  charge  of  matters  of  general  legislation 
and  appropriations ;  in  others  one  committee  has  charge 
of  the  first  and  another  that  of  the  second.  Notwith- 
standing general  rules  to  the  contrary,  matters  of  gen- 
eral legislation  are  often  handled  by  the  committee  on 
appropriations. 

Failure  of  Congress  to  Concentrate  Responsibility  for 
the  Consideration  of  Appropriation  Bills.  This  failure 
on  the  part  of  Congress  so  to  organize  itself  for  the 
consideration  in  detail  of  administrative  matters  and  the 

101 


'!  Ill-,   I'Kt  HJI.KM   01-    A    NATIONAL   lUJDCKT 
establishment   ol    effective   \v«»!  l.in;-    relations  between   il 

;iN<l  Hie  e--.ee  ||||\r  e  .l.ibh  .hmenl  ,  |  ,  I  e;;  I  e|  |  a  I  >le  elioilidl 
\\hcie  mailer,  i.l'  ;;eneial  leHslalion  afleeliiij.  (lie  wol  k 
nl  su«  h  •  i  h  •  .  .in-  ,  r,ni  erncd.  ||  is  nolhiii"  sln.rl  of 
di  ;i  .lion  ,  u  here  Ihe  mallei  lo  In-  ai  led  ii|..>n  is  Mi.il  of 
in. il. mi;  provision  i  ;  .,i  h  services. 

I  lere,  if  anywhcie,  il   would  seem  thai   Hie  p»liey  would 
In-  IHII  sllc(|  <»!    mil  ii  ,1  iii"    to  some  one  <  otlllllil  Ice,  oi    sill) 

<  « 'Miiini  I  er(  1 1  ic  i.i  ,|.  .  ,i   s  I  ud  y  iii}',  MI  dd  ail  the  operations 
ol   a   sci  \  n  e  as  i  cvealcd   in  ils  olln  ial   i  cpoi  Is,  ol   <  .illnr- 
hclorc   il    (he  nlhcci:,  ol    such   .sci  vice    lor   the  purpose  <>! 
elii  Hnr;   I'm  Ihei    infoi  inalion  and  cxplanal  ions,  ol   s<  i  u 
tini/inj;  the  eslimalc  ,    .iihniillcd  l,v  SIK  h  ollx  crs,  and,  on 

Ilic    I). l.f.    «.|     Sill   II    C   ..lllilll.il  Ion,    pt  cp.il  in-    .in    ;ipp|  .  ,pi  i.| 

I 1  "i  i  hill  ( •nihod^Bg1  its  conclusions  regarding  the  finan- 

<  ial  pi^visim \ff\.\\   should  he  made   lor  such  service   for 

the  er^[n^ycMi 

'•lhni|'(  lil.e  Mil.,  hi  iwevei  ,  r,  d«»ne  Tile  ejilne 
opei  al  iOTJ^Rml  in-ed-,  ol  a  service,  e-.<epl  po:,-.ihly  in  a 
few  ijjiolaled  cases,  ai  c  ncvei  consii  lered  a  I  one  Mine  m 
by  tlu  same  set  ol  persons.  l(*or  purposes  ol  -ippi  "pi  ia 

I  iullJ(  'nil"  I  (         .    lias     lll.nle     MlC     HlMl  •  .ll'dlly     I  I   I  .  I  I  I'  H  I .  I  I     .Mid 
jjM^^M  •  •  O          J 

s     dish  nc  I  ion      he  I  wee  1 1      I  he     hlllcaus      |HI>|M  i      at 
mi"  h  Hi    .ind    the    held    sci  \  i<  cs    < »     eslahlishuienl 
i    il    i\  (he    IIIIK  IKMI  of   ihe-.e  hnie.iu  .  h.  niaiiilaiii   .ind 
opci  ale.        \ppi  «»pi  ial  ions     for     llie     lirsl,     Ihe     hiireaus 

I  >l  Ope  I       .lie    i   i  »l  I     1 1  I  e  |  ( '(  |    I  )  \     '  •  I  !e      ,1  I  I  )('(  >|  )l  I II 1 1  I  CC    <  >  I     I  1 1C    <   <  il  I  I 

miller  Mil  approprial ions,  and  embodied  in  one  appro- 
p  i  1. 1 1  io  1 1  lull,  I.  ii«»\\n  as  I  he  legislative,  execuliv1*1  and 
judicial  appropi  1.1 1  ion  lull,  and  I  h<  <:.e  I  <  >i  the  second,  the 
held  establishments,  l>v  aiiolbei  subcommittee  and  em 

|HM||C(|     ill     .IIK'lliel      .Ippi  <  tpl   l.ll  h  ill     hill     kllOWII     .1'.     (lie      Mill 

diy   <i\il   .ippi '  ipi  i.it  i<  >n   hill      Iii   addition   l<>   Mn   ,   oilier 

eomilllltees     in.i\      he     <  «  >i  i  ,ide  I  1 1 1"     <»|||ei      bills     <  <  H  1 1 .1 1 1 1 1 1  \\\ 

IOJ 


COKKKI.ATION  1-OK   WJIH.M  M'V   I '!  ;  \<  I  '<  )M-,'  i 

provisions  vitally  alluding  the  financial  needs  of  such 


'I*  finitely   lo  lorah     M    poll   ibilil  y    in   ;my   on<    <  ommil  h  < 

for  the  conduct  of  affairs  in  any  particular  department 
or  subdivision  of  the  administrative  service.  In  practi- 
cally no  case  is  there  a  committee  so  constituted  that  it 
i"!  thai  in  n  belongs  the  whole  task  and  respon  i  hi  in/ 
of  famili  iM/m:',  itself  with  the  conditions,  operations 
and  needs  of  a  particular  service  or  class  of  services; 

nor  has  any  committee  any  reason  for  seeking  to  (-.tab 

lish  the  permanent,  intimate  relations  with  the  head  of 
a  service  which  is  essential  if  cordial  cooperation  be- 
tween the  directing  and  the  executing  authorities  is  to 

!><•  scnirco!. 

The  result  is  that  at  no  time  are  the  operations  and 
needs  of  a  service  studied  as  a  whole  either  by  a  com- 
mittee of  Congress  or  by  Congress  as  a  body,  The  sev- 
eral committees  having  in  hand  matters  pertaining  to 
the  work  or  financial  needs  of  a  service  may  have  quite 
different  irji-as  nr.anlin^  the  policy  that  JjoiiN  be  nin 

sued  in  respect  to  the  extension,  curtailment  or  mrraHi- 
cation  of  the  activities  of  such  service.  There  isTio 
member  to  whom  Congress  is  entitled  to  look  for  ex- 
planations and  advice  regarding  the  action  that  should 
be  taken  by  it  in  respect  to  a  particular  service.  With 
responsibility  distributed  as  it  is,  there  is  no  member  to 
whom  responsibility  can  be  attributed.  The  present 
system  is  thus  doubly  defective:  defective  in  not  secur- 
ing proper  working  relations  between  Congress  and  the 
executive,  and  defective  in  failing  to  locate  definitely 
that  responsibility  which  pertains  to  Congress  itself, 

103 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

Failure  of  Congress  to  Correlate  Its  Committee  System 
with  the  Organization  of  the  Executive  Branch  of  the 
Government.  The  reason  for  the  failure  on  the  part 
of  the  houses  of  Congress  to  make  their  committee 
organization  correspond  to  that  of  the  administrative 
branch  and  of  the  work  to  be  done  is  not  difficult  to 
find.  Congress  still  looks  upon  itself  as  primarily,  if 
not  almost  exclusively,  a  law-making  body.  In  organiz- 
ing for  the  performance  of  its  work  it  has  had  this  func- 
tion alone  in  mind.  Its  committees  are  preeminently 
committees  for  general  legislation.  Even  where  it  has 
been  compelled  to  create  a  special  committee  to  handle 
matters  of  current  appropriations  it  has  shown  no  appre- 
ciation of  the  necessity  for  making  the  organization  of 
this  committee  correspond  to  the  administrative  ma- 
chine to  be  financed.  There  has,  in  a  word,  been  an 
utter  failure  to  attempt,  much  less  to  carry  into  execu- 
tion, a  scheme  of  organization  that  will  correlate  or 
articulate  with  that  of  the  administrative  machine  to  be 
run. 

The  fact  that  the  two  parts  of  the  governmental  ma- 
chine do  not  articulate  and  work  in  harmony  is  only  too 
well  known.  The  most  unfortunate  feature  of  this  con- 
dition of  affairs  is,  however,  that  this  situation  is  ac- 
cepted as  a  necessary  consequence  of  our  theory  of 
government  with  its  distribution  of  governmental  pow- 
ers. The  attitude  of  most  students  is  that  the  only  rem- 
edy is  to  abandon  this  theory  and  adopt,  in  whole  or 
in  part,  that  of  a  union  of  powers  as  exemplified  in  the 
government  of  Great  Britain.  It  is  with  this  attitude 
that  the  writer  wishes  to  take  issue.  It  may  be  that  we 
cannot  secure  that  perfect  correlation  of  directing  and 
executing  powers  that  is  secured  in  Great  Britain 
through  the  concentration  of  legislative  and  executive 

104 


CORRELATION  FOR  BUDGETARY  PURPOSES 

functions  in  the  same  hands.  It  is  his  belief,  however, 
that  we  can  go  a  long  way  toward  securing  an  equally 
harmonious  relation  between  the  two  authorities,  pro- 
vided we  are  willing  deliberately  to  put  forth  our  efforts 
in  this  direction.  It  is  with  this  object  in  view  that  he 
has  attempted  in  the  following  pages  to  outline  at  least 
one  method  by  which,  in  his  opinion,  this  desirable  end 
can  be  secured. 

Outline  of  Plan  Proposed  to  Secure  Correlation  of  the 
Two  Branches.  Briefly,  the  action  here  proposed  is 
that  Congress  shall  definitely  recognize  its  function  as 
a  board  of  directors  and  shall  organize  a  committee 

»  system  with  the  performance  of  that  function  directly 
in  mind.  To  this  end,  each  of  the  houses  of  Congress 
should  provide  for  a  system  of  committees  paralleling 
and  corresponding  to  the  system  of  organization  that  it 
has  given  to  the  executive.  This  committee  scheme,  in 
a  word,  should  be  based  on  organization  units  instead 
of  topics  of  legislation.  The  jadoption  of  this  plan  will 
mean  that  there  will  be  in  each  house  of  Congress  a 
committee  having  direct  charge  of,  and  responsibility 
for,  each  service  of  the  administrative  branch.  Author- 
ity and  responsibility,  in  the  first  instance  at  least,  will 
not  only  be  as  definitely  located  in  Congress  as  in  the 
executive  but  will  be  located  according  to  the  same 
scheme  or  principle.  It  will  thus  mean  the  establish- 
ment of  a  system  under  which  direct,  personal  relations 
may  be  obtained  between  the  authorizing  and  the  ex- 
ecuting authorities  that  is  now  almost  wholly  lacking. 
At  the  present  time  there  is  no  one  person  in  Congress 
to  whom  the  head  of  a  service  is  entitled  to  go  as  needs 
arise  for  joint  action  on  the  part  of  the  two  branches  of 
government.  There  can  be  little  reason  to  doubt  that, 

105 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

under  the  proposed  arrangement,  close  personal  rela- 
tion would  be  established  between  the  head  of  each  serv- 
ice and  the  chairman  of  the  corresponding  committee  in 
Congress.  The  former  would  take  up  with  the  latter 
the  needs  of  his  service,  the  changes  required  in  respect 
to  legislation  affecting  his  service,  the  financial  needs 
of  the  latter,  etc.  This  he  would  do  by  informal  con- 
ference as  well  as  through  more  formal  communica- 
tions. The  latter  would,  in  turn,  call  upon  the  former 
for  his  assistance  and  advice  in  respect  to  propositions 
advanced  and  referred  to  his  committee  for  action. 
Thus,  notwithstanding  the  separation  of  powers,  in- 
herent in  our  system,  means  would  be  provided  for 
bringing  the  two  into  far  more  effective  and  harmonious 
relations  than  are  at  present  possible. 

The  Problem  of  Distinguishing  between  Appropriations 
and  Matters  of  General  Legislation.  The  foregoing  is 
but  a  statement  of  the  general  character  of  the  com- 
mittee system  which,  it  is  believed,  should  be  pro- 
vided. To  put  this  system  in  operation  a  number  of 
difficulties  have  to  be  met.  Among  these  much  the  most 
important  is  that  of  distinguishing,  and  separately  pro- 
viding for,  the  handling  of  matters  of  general  legisla- 
tion and  of  appropriations.  The  necessity  for  making 
this  distinction  gives  rise,  at  the  present  time,  to  prob- 
ably more  difficulty  in  working  out  a  proper  system  of 
congressional  procedure  than  any  other  matter.  Not 
the  least  advantage  of  the  proposed  plan  is  that  it  will 
go  far  toward  meeting  this  difficulty. 

From  the  purely  administrative  or  business  stand- 
point, the  logical  system  would  seem  to  be  that  of  each 
service  making  known  what  legislation  it  needs  for  the 
successful  prosecution  of  its  work  in  all  respects  during 

106 


CORRELATION  FOR  BUDGETARY  PURPOSES 

the  ensuing  year.  In  a  growing  service  this  means,  in 
many  cases,  that  it  will  want,  not  only  funds  to  carry 
on  its  operations  as  in  the  past,  but  new  offices,  new 
stations,  additions  to  its  plant,  a  readjustment  of  sal- 
aries, and  often  a  more  or  less  radical  reorganization 
of  its  administrative  system,  or  authorization  to  under- 
take new  lines  of  work  not  sanctioned  by  existing  law. 
Whether  or  not  these  demands  are  met  materially  af- 
fects the  appropriations  desired.  It  would  seem,  there- 
fore, that  the  first  thing  that  Congress  would  have  to 
decide,  in  respect  to  any  service,  would  be  what  changes, 
if  any,  in  existing  law  affecting  the  operations  of  such 
service  it  was  prepared  to  authorize.  Only  after  it  had 
reached  a  decision  in  respect  to  such  matters  would  it 
be  in  a  position  to  determine  the  funds  that  would  be 
required  to  carry  out  the  scheme  of  work  and  organiza- 
tion decided  upon. 

From  the  legislative  viewpoint,  however,  this  scheme 
of  considering  matters  of  new  legislation  and  of  provid- 
ing for  the  support  of  the  government  as  already  au- 
thorized by  law  presents  serious  objections.  Any  new 
legislation  may  present  questions  of  general  policy  con- 
cerning which  radical  differences  of  opinion  may  exist 
in  Congress.  If  propositions  of  this  character  are  em- 
bodied in  the  general  appropriation  bills  discussion  will 
center  around  them  and  the  passage  of  any  bill  at  all 
may  be  endangered.  At  best  the  individual  member  is 
often  placed  in  the  position  where  he  will  have  to  sup- 
port a  measure  to  which  he  is  strongly  opposed  or  con- 
tribute by  his  vote  to  stopping  the  wheels  of  government 
through  the  refusal  of  supplies  essential  for  its  opera- 
tion. Furthermore,  even  though  a  majority  for  the  bill 
is  secured,  the  President  is  put  in  the  position  where  he 
can  only  exercise  his  constitutional  prerogative  of  dis- 

107 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

approving  of  legislation  to  which  he  is  opposed  by  veto- 
ing the  supply  acts  required  for  the  due  conduct  of 
government. 

This  situation  of  affairs  presented  itself  in  an  acute 
form  at  the  1911-1912  session  of  Congress,  due  to  the 
fact  that  the  Committee  on  Appropriations  of  the  House 
reported  certain  appropriation  bills  containing  new  legis- 
lation of  a  radical  character.  Among  other  things, 
these  bills  provided  for  a  reorganization  of  the  War  De- 
partment in  certain  important  particulars,  the  change  in 
the  term  of  enlistments  in  the  army,  the  abolition  of  the 
court  of  commerce  and  a  change  of  law  regarding  the 
tenure  of  office  of  civil  employees  at  Washington.  Not- 
withstanding the  bitter  opposition  of  many  members, 
the  appropriation  bills  containing  these  provisions  were 
forced  through  the  two  houses  and  presented  to  Presi- 
dent Taft.  To  prevent  their  enactment  into  law  the 
President  was  forced  to  veto  the  bills  in  their  entirety, 
with  the  result  that  the  operations  of  the  government 
were  only  continued,  pending  a  final  adjustment  of  the 
difficulty,  through  the  passage  of  joint  resolutions  con- 
tinuing in  force  existing  appropriation  acts.  Though 
rarely  reaching  the  acute  stage  that  they  did  during  this 
session,  these  difficulties  are  always  present  and  give 
rise  to  more  or  less  trouble.  Any  system  of  committee 
organization  must  take  account  of  these  conflicting  con- 
siderations, and  a  procedure  must  be  provided  that  will, 
if  possible,  harmonize  them. 

Manner  in  Which  Proposed  Plan  Meets  This  Problem. 
How  does  the  system  advocated  propose  to  meet  this 
difficulty?  It  does  so  in  the  following  way:  It  pro- 
poses that  the  committees  as  above  described  shall  be 
strictly  committees  of  general  legislation  corresponding 

108 


CORRELATION  FOR  BUDGETARY  PURPOSES 

to  the  committees  now  possessed  by  the  two  houses.  In 
addition  to  these  committees,  it  proposes  that  there  shall 
be  in  each  house  a  single  committee  on  appropriations 
to  which  alone  shall  be  granted  authority  to  report  bills 
carrying  an  appropriation.  Entire  responsibility  for  the 
voting  of  funds  will  thus  be  concentrated,  in  the  first 
instance,  in  this  committee.  The  establishment  of  such 
a  committee  has  frequently  been  advocated  both  inside 
and  outside  of  Congress.1  The  distinctive  feature  of 
the  present  proposal  is  that  this  committee  shall  be  com- 
posed, with  the  exception  possibly  of  the  chairman,  ex- 
clusively of  persons  holding  the  chairmanships  of  the 
general  legislation  committees,  or  such  of  them  as  are 
most  intimately  concerned  with  the  operations  of  gov- 
ernment. It  will  thus,  with  the  exception  of  the  chair- 
man, be  composed  wholly  of  ex  officio  members. 

In  the  next  place  it  is  proposed,  as  an  essential  fea- 
ture of  the  scheme,  that  this  committee  should  organize 
itself  into  subcommittees  and  divisions  of  subcommittees 
corresponding  closely,  or  with  fair  approximation,  to 
the  system  of  general  committees  and  the  organization 
of  the  executive  branch  of  the  government.  There 
should  thus  be  a  subcommittee  for  Congress  itself,  one 
for  the  judiciary,  and  one  for  each  of  the  executive  de- 

1  The  proposal  was  one  of  the  five  selected  by  President  Wilson  for 
specific  advocacy  in  his  address  to  Congress  at  the  opening  of  the 
second  war  session,  in  December,  1917.  It  was  also  introduced  in  the 
House  of  Representatives  by  Mr.  Fitzgerald,  Chairman  of  the  Com- 
mittee on  Appropriations,  on  September  29,  1917,  in  the  following 
form: 

"Resolved,  That  during  the  present  emergency  all  appropriations 
shall  originate  in  and  be  reported  from  a  single  committee,  and  all 
estimates  for  the  support  of  the  various  governmental  establishments 
shall  be  referred  to  said  committee.  No  appropriations  shall  be  re- 
ported in,  or  be  in  order  as  an  amendment  to,  a  bill  reported  from 
any  other  committee,  and  the  question  of  order  may  be  raised  to 
appropriations  reported  in  bills  from  other  committees  when  reached 
in  their  consideration  without  having  been  previously  reserved." 

109 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

partments  and  independent  establishments.  Each  of 
these  subcommittees  should  then  be  further  subdivided 
into  divisions  corresponding  to  the  several  bureaus  or 
services  included  within  the  branch  of  the  administra- 
tion over  which  the  subcommittee  has  jurisdiction.  The 
result  of  this  scheme  of  organization  would  be  to  repro- 
duce within  the  committee  on  appropriations  a  hierarchy 
of  committees  corresponding  at  all  essential  points  with 
that  of  the  executive. 

In  operating  this  scheme,  the  proposal  is  that  all  esti- 
mates for  the  government  be  referred  to  this  single 
committee  on  appropriations.  On  their  receipt  they 
would  be  immediately  split  up,  the  estimates  for  each 
branch  of  the  service  being  referred  to  the  subcom- 
mittee having  the  affairs  of  that  branch  in  charge.  This 
subcommittee  would  in  like  manner  apportion  the  work 
among  its  subdivisions.  It  will  be  the  duty  of  each  such 
division  of  a  subcommittee  to  undertake  the  detailed 
work  of  familiarizing  itself  with  the  history,  organiza- 
tion, activities  and  needs  of  the  service  or  services  as- 
signed to  it,  of  examining  the  reports  and  estimates  sub- 
mitted by  the  heads  of  such  services,  of  holding  hear- 
ings for  the  development  of  such  further  information 
as  may  be  desired,  and  of  embodying  its  conclusions  in 
the  first  draft  of  an  appropriation  bill.  This  draft 
should  then  be  submitted  to  the  subcommittee  of  which 
it  is  a  part  for  consideration  by  it  sitting  as  a  whole. 
The  subcommittee  will  thus  bring  together  the  parts 
elaborated  by  its  divisions,  make  such  changes  in  them 
as  it  may  deem  fit  in  order  to  harmonize  the  conclusions 
or  make  the  outcome  conform  to  such  general  policy  as 
it  may  see  fit  to  adopt,  and  report  its  draft  to  the  full 
committee  on  appropriations. 

The  committee  on  appropriations  would  thus  in  due 

no 


CORRELATION  FOR  BUDGETARY  PURPOSES 

course  receive  drafts  of  bills  covering  all  branches  of 
the  government  in  such  a  form  that  it  could  consider 
not  only  each  draft  on  its  merits,  but  all  drafts  in  their 
relations  to  each  other  and  to  the  general  state  of  the 
finances  of  the  nation.  It  is  taken  for  granted  that  each 
of  the  divisions  of  the  subcommittees,  and  the  subcom- 
mittees themselves,  would  submit  with  their  drafts  re- 
ports setting  out  clearly  just  what  changes  they  had 
made  over  existing  legislation,  with  statements  giving 
their  reasons  for  proposing  such  departures,  and  a  re- 
port of  the  testimony  taken  or  documents  received  by 
them  as  aids  to  them  in  reaching  a  conclusion. 

We  have,  however,  yet  to  show  how,  under  this 
scheme,  the  conflicting  considerations  represented  by 
the  desirability  of  having  matters  of  new  legislation 
made  the  subject  of  special  bills  and  yet  be  considered 
in  connection  with  requests  for  appropriations  may  be 
met.  This  is  secured  by  the  suggestion  that  the  mem- 
bership of  the  committee  on  appropriations  consist 
wholly  of  the  chairmen  of  the  committees  on  general 
legislation,  or  such  of  them  as  handle  matters  affecting 
in  any  direct  way  the  operations  of  the  government.  In 
making  up  the  composition  of  the  subcommittees  and 
their  subdivisions  it  is  proposed  that  the  chairman  of  a 
committee  of  general  legislation  having  in  charge  cer- 
tain matters  would  be  the  chairman  of  the  subcommittee 
of  the  committee  on  appropriations  having  in  charge  the 
affairs  of  the  service  or  services  whose  operations  fall 
within  the  same  field.  Thus  the  chairman  of  the  sub- 
committee on  the  Bureau  of  Navigation  and  the  Steam- 
boat Inspection  Service  would  be  the  member  having  the 
chairmanship  of  the  legislative  committee  on  naviga- 
tion. Suppose  now,  as  the  result  of  occurrences  such  as 
the  Titanic  disaster,  the  chiefs  of  the  Bureau  of  Naviga- 

iii 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

tion  and  the  Steamboat  Inspection  Service  and  their  offi- 
cial superior,  the  Secretary  of  Commerce,  become  con- 
vinced that  the  government  should  do  much  more  than 
it  has  done  in  the  past  for  the  insuring  that  due  precau- 
tions are  taken  for  safety  at  sea.  To  do  this  both  new 
legislation  and  additional  appropriations  for  the  ensuing 
year  will  be  required.  The  undertaking  of  this  work 
may  also  render  desirable  a  thorough  reorganization  of 
the  service  or  services  intrusted  with  the  work.  It  is 
evident  that  under  the  committee  system  outlined  the 
initiative  in  respect  to  the  responsibility  for  getting  both 
matters  before  Congress  for  action  will  fall  to  the  same 
individual,  viz.,  the  member  who  is  chairman  of  the  sub- 
committee (of  the  committee  on  appropriations)  on  the 
Bureau  of  Navigation  and  the  Steamboat  Inspection 
Service.  Through  him  the  advisability  of  enacting  the 
new  legislation  can  be  immediately  taken  up  by  the  com- 
mittee on  navigation  and,  if  approved,  a  bill  reported  for 
this  purpose.  As  chairman  of  the  subcommittee  on 
appropriations  the  estimates  of  the  two  services  can  be 
framed  according  to  the  decision  reached  by  the  com- 
mittee on  navigation  and  the  probability  of  its  decision 
being  supported  by  Congress.  As  the  appropriation 
bills  are  usually  passed  at  the  end  of  the  session,  oppor- 
tunity will  be  afforded  to  change  provisions  in  the  ap- 
propriation bills  so  as  to  make  them  conform  to  legisla- 
tion actually  had.  If  necessary,  resort  can  be  had  to 
supplementary  appropriation  acts. 

General  Summary.  We  have  now  completed  the  task 
to  which  we  addressed  ourselves.  That  there  may  be 
no  misunderstanding  regarding  the  exact  character  of 
the  proposal  here  made,  we  desire,  notwithstanding  the 
repetition  involved,  to  recapitulate  what  to  us  seems  its 


CORRELATION  FOR  BUDGETARY  PURPOSES 

essential  features.  Briefly  the  situation  is  this :  In  the 
government,  as  in  all  undertakings,  the  two  functions 
of  authorizing,  directing,  financing  and  supervising,  on 
the  one  hand,  and  of  executing,  on  the  other,  may  be 
clearly  distinguished.  In  private  undertakings  the  per- 
formance of  the  first  is  intrusted  to  a  board  of  directors, 
that  of  the  second  to  an  executive  or  administrative  staff. 
In  a  government  the  first  is  assigned  to  the  legislature, 
the  second  to  the  executive.  Both  functions  are  but 
parts  of  one  process  having  a  common  end  in  view.  If 
efficiency  is  to  be  secured  it  is  imperative  that  the  au- 
thorities exercising  these  functions  shall  be  so  organ- 
ized, and  their  rules  of  procedure  so  formulated,  that 
complete  harmony  in  their  working  relations  may  be 
obtained.  We  have  here  the  primary  essential  to  an 
efficient  administration  of  affairs.  So  fundamental  is 
it,  that  it  may  almost  be  said  that  no  real  approach 
toward  securing  efficiency  can  be  made  until  this  pri- 
mary condition  has  been  met.  In  all  the  effort  now 
being  put  forth  to  improve  governmental  conditions  first 
consideration  should,  therefore,  be  given  to  this  problem. 
With  a  satisfactory  solution  to  it,  other  reforms  will 
follow  with  comparative  ease. 

In  Great  Britain  this  problem  has  been  perfectly 
solved  through  the  union  of  the  two  functions  in  the 
same  hands,  though,  be  it  remarked,  the  two  functions 
themselves  are  kept  far  more  distinct  than  they  are  in 
this  country.  Under  our  form  of  government  such  a 
solution  is  impossible.  The  problem  as  it  presents  itself 
to  us  is,  therefore,  that  of  so  organizing  the  two  authori- 
ties to  which  the  two  functions  are  intrusted  that,  not- 
withstanding such  separation,  they  will  work  in  close 
cooperation  with  each  other. 

The  first  point  that  this  paper  has  attempted  to  make 

"3 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

is  that  no  real  effort  has  been  made,  either  by  Congress 
or  by  students  of  our  constitutional  system,  to  work  out 
this  problem  from  this  point  of  view.  Discussion  has 
largely  centered  around  the  comparative  merits  of  the 
system  of  united  and  distributed  powers.  So  far  as  the 
writer  has  information  he  knows  of  no  serious  attempt 
to  take  our  system  as  it  is  and  perfect  it  from  this  point 
of  view.  Certainly  Congress  itself  has  shown  little  or 
no  appreciation  of  the  fact  that  in  acting  as  the  board 
of  directors  for  the  government  it  has  a  function  quite 
distinct  from  its  function  as  a  general  lawmaker,  and 
calling  for  quite  a  different  organization.  The  primary 
consideration  urged,  therefore,  is  that  this  distinction 
should  be  recognized,  and  that  Congress  should  deliber- 
ately apply  itself  to  the  task  of  specially  organizing  for 
the  performance  of  this  function. 

The  second  point  made  is  that  in  seeking  to  do  its 
duty  in  this  field  it  should  unequivocally  accept  the  prin- 
ciple that  its  organization  for  this  work  should  follow, 
and  conform  to,  that  of  the  executive.  Only  as  it  does 
so  will  it  be  possible  to  make  the  two  systems  articulate. 
Only  as  such  articulation  is  secured  will  it  be  possible  to 
make  the  two  systems  work  in  harmony  and  cooperation 
with  each  other.  This  means,  in  practice,  that  each 
house  of  Congress  shall  have  a  system  of  committees 
corresponding  with  approximate  closeness  to  the  system 
of  organization  of  the  government.  If  this  is  done,  not 
only  will  responsibility  and  authority  be  definitely  lo- 
cated, but  the  two  systems  will  touch  at  all  points,  thus 
permitting  of  close  cooperative  relations  throughout. 

Especially  is  it  imperative  that  entire  responsibility 
for  appropriating  funds  for  the  support  of  the  govern- 
ment shall  be  concentrated  in  a  single  committee  and 
that  this  committee  shall  have  an  internal  organization 

114 


CORRELATION  FOR  BUDGETARY  PURPOSES 

corresponding  to  that  of  the  executive  to  be  financed. 
It  is  through  the  examination  of  estimates  and  the  vot- 
ing of  supplies  that  Congress  has  the  real  opportunity 
of  passing  upon  the  manner  in  which  the  executive  has 
discharged  its  duties,  of  gaining  detailed  knowledge  of 
the  needs  of  the  several  services,  and  of  intelligently 
making  provision  for  the  future.  It  is  impossible  to 
perform  this  duty  properly  unless  the  work  is  distrib- 
uted among  subcommittees  in  some  way.  The  only 
effective  way  in  which  this  distribution  can  be  made  is 
by  making  it  correspond  to  the  distribution  of  duties  in 
the  executive.  In  this  way  can  centralization  of  respon- 
sibility be  secured  and  provision  be  made  for  authorities 
within  Congress  which  can  maintain  intimate  relations 
with  corresponding  authorities  in  the  executive  branch. 
Finally,  the  proposition  is  advanced  that  this  central 
committee  on  appropriations  should  be  composed  of  the 
chairmen  of  the  general  legislation  committees.  This  is 
necessary  in  order  to  secure  the  complete  centralization 
of  responsibility  and  authority  in  respect  to  particular 
services  and  lines  of  work  that  is  essential  to  efficiency. 
The  one  point  aimed  at  is  that  there  shall  be  within 
Congress  the  same  distribution  of  duties  that  obtains  in 
the  executive,  that  there  shall  be  all  along  the  line  a 
correspondence  between  the  two  branches  of  the  govern- 
ment, and  consequently  two  officials,  one  in  Congress 
and  the  other  in  the  executive,  occupying  correlative 
positions  in  respect  to  the  work  to  be  done.  With  this 
secured,  the  basis  will  at  least  be  laid  for  an  harmonious 
day-to-day  cooperation  between  the  two  which  is  im- 
possible under  present  organization  conditions. 


CHAPTER  VII 

ALLOTMENT  OF  FUNDS  BY  EXECUTIVE  OF- 
FICIALS AN  ESSENTIAL  FEATURE  OF  ANY 
CORRECT  BUDGETARY  SYSTEM  x 

That  Congress  is  to  be  the  body  that  should  finally 
determine  the  amount  of  money  to  be  available  each 
year  for  the  support  of  the  various  branches  of  govern- 
ment no  one  questions.  In  exercising  this  function, 
however,  Congress  has  open  to  it  a  wide  range  of  dis- 
cretion. It  can  do  as  the  British  Parliament  did  for  cen- 
turies after  it  had  taken  to  itself  the  power  of  the  purse, 
vote  a  lump  sum,  or,  what  was  the  same  thing,  the  total 
product  of  certain  taxes,  for  the  support  of  the  govern- 
ment, leaving  it  to  the  executive — the  crown — to  apply 
this  sum  to  the  various  objects  of  government  as  its  dis- 
cretion dictated.  Or  it  can,  as  Parliament  now  does, 
specify  in  general  terms  the  manner  in  which  this  total 
shall  be  distributed  among  the  several  branches  of  gov- 
ernment, leaving  to  the  executive  the  authority  to  allot 
these  sums  more  specifically.  Or,  finally,  it  can  do  as 
Congress  now  in  great  part  does — attempt  to  set  forth 
in  the  greatest  practicable  detail  the  precise  manner  in 
which  the  sums  voted  shall  be  applied. 

The  Present  System  of  Itemizing  Appropriations.  The 
latter  method  means  that  Congress  seeks  by  law  to 
give  precise  and  detailed  instructions  to  the  executive 

1  Reprinted  from  the  Proceedings  of  the  American  Political  Science 
Association,  1912. 

116 


ALLOTMENT  OF  FUNDS 

as  to  exactly  how  the  money  appropriated  shall  be  spent, 
just  what  stations,  bureaus,  and  offices  shall  be  main- 
tained, how  much  money  shall  be  spent  for  the  remuner- 
ation of  personnel,  the  number  of  persons  that  shall  be 
employed,  the  compensation  that  shall  be  paid  to  each, 
the  character  of  the  work  that  shall  be  undertaken,  and 
the  expenditure  that  shall  be  made  for  each  item,  the 
amount  of  money  that  shall  be  spent  for  this  or  that 
kind  of  supplies,  materials,  etc.  This  method  ignores,  as 
far  as  it  can,  the  fact  that  the  efficient  conduct  of  affairs 
necessarily  involves  the  exercise  of  discretion  from  day 
to  day  by  those  actually  in  charge  of  the  work  to  be  per- 
formed, that  it  is  impossible  to  estimate  in  detail  the 
precise  sum  that  will  be  required  for  each  subdivision 
of  a  work,  that  contingencies  impossible  to  foresee  will 
constantly  arise  making  it  desirable  that  decisions  as 
first  taken  should  be  radically  changed. 

It  is  not  contended  that  Congress,  in  all  cases,  carries 
its  particularization  of  the  manner  in  which  money  ap- 
propriated for  the  support  of  the  government  shall  be 
expended  to  the  extent  above  suggested.  Anyone  fa- 
miliar with  administrative  affairs  at  Washington,  or 
the  contents  of  the  general  appropriation  acts,  can  easily 
point  out  numerous  cases  where  Congress  has  made  its 
appropriations  for  certain  services  or  certain  categories 
of  work  in  the  form  of  so-called  "lump-sum"  appropria- 
tions. The  best  example  that  the  writer  knows  of  such 
an  appropriation  is  that  made  for  the  taking  of  the  thir- 
teenth census  and  the  support  of  the  Bureau  of  the  Cen- 
sus during  the  three-year  census  period.  In  effect  Con- 
gress voted  in  three  installments,  in  as  many  appropria- 
tion acts,  covering  this  period,  a  lump-sum  of  fourteen 
or  fifteen  million  dollars  for  the  taking  of  this  census 
and  the  carrying  on  of  other  lines  of  work  in  charge  of 

117 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

the  Bureau  of  the  Census.  Although  certain  limitations 
were  imposed  upon  the  bureau  in  respect  to  the  number 
of  persons  who  might  be  employed  at  certain  salaries, 
the  expenditure  of  this  large  sum  was  practically  left  to 
the  discretion  of  the  Director  of  the  Census,  and  his 
official  superior,  the  Secretary  of  Commerce  and  Labor. 

The  existence  of  appropriations  of  this  character  does 
not,  however,  controvert  the  statement  that  the  general 
policy  of  Congress  in  making  provision  for  the  support 
of  the  government  is  otherwise.  All  of  these  cases  may 
be  taken  as  exceptions.  Congress  makes  them  unwill- 
ingly. It  looks  upon  them  as  exceptions  to  its  general 
policy  of  specification  in  all  practicable  detail.  As  soon, 
and  as  far,  as  it  can  secure  the  basis  upon  which  to  act, 
it  eliminates  them.  This  spirit  can  be  traced  in  the  pol- 
icy pursued  in  respect  to  many  services  and  lines  of 
work.  When  new  services  or  lines  of  work  are  first 
established  or  inaugurated,  Congress,  from  lack  of  in- 
formation, has  been  forced  to  make  the  appropriation 
for  their  support  in  general  terms.  From  year  to  year, 
however,  progress  is  made  toward  greater  definiteness 
as  regards  the  manner  in  which  the  appropriation  shall 
be  expended,  until  finally  a  condition  of  detailed  specifi- 
cation is  reached.  We  may  thus  say  that  the  policy  of 
Congress,  no  matter  how  many  exceptions  may  be 
pointed  out,  is  to  determine  in  advance,  as  far  as  it  is 
practicable  to  do  so,  the  precise  manner  in  which  all 
moneys  appropriated  shall  be  expended. 

Is  this  the  correct  policy?  Does  it  lend  itself  to  econ- 
omy and  efficiency  in  the  conduct  of  government?  If 
not,  what  policy  should  be  pursued? 

Two  Methods  of  Financial  Control:  through  Specifica- 
tion in  Advance  and  through  Accounts  and  Reports. 

118 


ALLOTMENT  OF  FUNDS 

To  answer  these  several  questions  it  is  necessary 
to  recognize  that  the  matter  of  appropriations  has 
two  sides.  It  must  be  looked  at  from  the  legislative  as 
well  as  from  the  executive  viewpoint.  In  respect  to  the 
operations  proper  of  the  government,  Congress  has  three 
important  functions  to  perform.  It  is  its  duty  to  direct, 
to  finance,  and  to  supervise.  Upon  it  falls  the  obliga- 
tion of  determining  what  shall  be  activities  of  the  gov- 
ernment, of  providing  the  funds  for  their  conduct,  and 
of  seeing  that  the  directions  given  are  observed  and  that 
the  moneys  voted  are  expended  in  a  proper  manner. 

This  separation  of  the  functions  of  Congress  in  rela- 
tion to  administration  is  of  importance,  since  the  admin- 
istration, chafing  against  the  rigid  restrictions  placed 
upon  it,  seeing  its  hands  tied  in  respect  to  the  expendi- 
ture of  funds,  and  finding  itself  often  in  a  position  where 
it  cannot  meet  emergencies  as  they  arise,  is  apt  to  lay 
the  whole  blame  upon  Congress.  To  it  the  policy  pur- 
sued by  that  body  is  simply  the  result  of  the  desire  of 
the  latter  to  be  the  dominating  factor  in  respect  to  the 
conduct  of  affairs,  as  but  an  evidence  of  the  wish  of 
persons  to  magnify  their  importance  and  exercise  all  the 
authority  they  can  grasp. 

This  feeling,  natural  as  it  is,  is,  in  the  opinion  of  the 
writer,  an  unjustifiable  one.  Congress  seeks  to  specify 
in  the  greatest  practicable  detail  how  money  shall  be  ex- 
pended, not  because  it  desires  to  usurp  the  functions  of 
the  administrator  and  to  deprive  the  latter  of  all  initia- 
tive and  discretion,  but  because  it  is  the  only  practicable 
way  that  it  has  discovered  by  which  it  can  exercise  the 
function,  which  all  must  agree  it  possesses,  of  super- 
vising and  controlling  the  manner  in  which  the  execu- 
tive performs  its  duties. 

It  should  be  remembered  that  where  discretion  is 

119 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

lodged  in  executive  officials  in  respect  to  the  expendi- 
ture of  funds  such  officials  are  subject  to  much  the  same 
\  pressure  from  the  outside  as  are  members  of  Congress. 
If  the  matter  is  one  of  prosecuting  work  in  this  section 
of  the  country  or  in  another,  or  of  maintaining  this 
station  and  abolishing  that  one,  of  fixing  the  com- 
pensation of  this  official  or  that  at  a  high  or  low 
figure,  pressure  exceedingly  difficult  to  resist  by  or  on 
behalf  of  the  sections  or  persons  interested  will  imme- 
diately develop.  Anyone  familiar  with  the  details  of 
government  work  can  mention  any  number  of  cases 
where  the  grant  of  executive  discretion  has  been  abused. 
Many  cases  where  appropriations  in  detail  have  been 
substituted  for  appropriations  in  general  terms  have 
been  directly  due  to  the  attempt  on  the  part  of  Congress 
to  prevent  in  the  future  abuses  which  have  occurred  in 
the  past.  The  problem  is  thus  by  no  means  as  simple 
as  it  would  at  first  sight  appear.  We  have  here  con- 
flicting considerations  which  it  is  by  no  means  easy  to 
harmonize,  yet  harmonized  the  writer  believes  they  can 
be  if  the  device  and  practice  advocated  in  the  present 
paper  are  followed.  That  this  device  and  practice  may 
be  clearly  understood  it  is  necessary  that  one  other  prin- 
ciple of  administration  should  be  discussed. 

Supervision  and  control,  such  as  is  the  function  of 
Congress  in  respect  to  the  administration,  can  be  exer- 
cised in  two  ways.  If  a  board  of  directors  of  a  cor- 
poration with  headquarters,  say,  in  Washington  has  the 
duty  of  directing  and  controlling  the  operations  of  a 
number  of  establishments  located  at  different  points,  it 
can  exercise  this  function  by  either:  (i)  laying  down 
the  rule  that  the  managers  of  their  several  establish- 
ments shall  undertake  no  work  and  incur  no  expendi- 
tures until  they  have  received  previous  authorization 

I2O 


ALLOTMENT  OF  FUNDS 

from  the  board;  or  (2),  it  can  formulate  a  general  pro- 
gram of  work,  place  at  the  disposal  of  the  managers 
funds  believed  to  be  sufficient  to  permit  of  the  carrying 
out  of  such  program,  and  then  exercise  supervision  over 
the  manner  in  which  this  trust  is  discharged  through  the 
requirement  periodically  of  detailed  reports  showing 
monthly  how  the  money  has  been  expended.  Under  one 
system,  control  is  exercised  through  direction  in  ad- 
vance; under  the  other,  through  the  requirement  of 
rigid  accountability  for  work  done. 

There  is  here  presented  a  clear-cut  choice  of  methods. 
Everyone  making  use  of  agents  for  the  carrying  on  of 
a  business  has  to  make  choice  of  the  extent  to  which  he 
will  rely  upon  one  or  the  other.  What  the  choice  will  be 
is  determined  largely  by  the  extent  to  which  it  is  possi- 
ble for  the  person  directing  the  enterprise  himself  to 
determine  in  advance  what  his  local  manager  should  do. 
There  can  be  no  question  that  in  enterprises  comparing 
in  scope  and  complexity  to  government  operations,  the 
second  of  the  two  methods  of  supervision  and  control 
will  be  the  one  adopted.  In  this  way,  and  in  this  way 
only,  can  it  be  hoped  to  secure  real  efficiency  and  econ- 
omy in  operation.  This  is  the  method,  therefore,  that  is 
adopted  by  all  large  private  enterprises.  Congress,  with 
its  policy  of  detailed  appropriation  acts,  bristling  with 
limitations  of  all  sorts,  has  adopted  the  former.  Now 
why  has  Congress  pursued  this  policy?  Congress  is 
composed  to  a  very  considerable  extent  of  members 
familiar  with  business  practice.  It  has  done  so,  not  be- 
cause it  was  ignorant  of  the  disadvantages  incident  to 
the  attempt  to  prescribe  minutely  in  advance  what  shall 
be  done.  No  one  knows  better  than  the  members  of 
Congress,  and  particularly  those  serving  on  the  appro- 
priation committees,  how  bad  are  the  results  in  many 

121 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

cases  of  this  attempt  to  tie  down  the  administration,  to 
circumscribe  their  discretion,  to  limit  their  authority. 
It  has  made  tKe  election  simply  because  it  saw  no  other 
way  out.  It  was  either  that  or  an  abandonment  on  its 
part  of  the  attempt  to  exercise  the  obligation  clearly 
resting  upon  it  of  supervising,  and,  in  the  last  resort, 
controlling  the  conduct  of  government  affairs.  Funda- 
mentally, therefore,  the  adoption  of  the  present  practice 
of  detailed  appropriation  bills,  of  the  policy  of  directing 
rather  than  supervising,  is  due  to  the  failure  to  develop 
means  through  which  the  latter  policy  may  be  effectively 
employed. 

Fundamental  Principles  That  Should  Govern  Congress  in 
Appropriating  Funds.  The  foregoing  may  seem  to 
be  a  very  indirect  method  of  approaching  the  subject 
to  which  this  paper  relates.  It  is  impossible,  how- 
ever, properly  to  support  a  proposal  of  means  for  the 
solution  of  a  problem  until  the  contents  of  the  prob- 
lem are  clearly  understood.  Until  we  know  just  what 
are  the  proper  functions  of  Congress  in  respect  to 
financing  the  administration,  the  difficulties  that  it  has 
to  contend  with  in  discharging  these  functions,  the  pos- 
sible lines  of  action  that  are  open  to  it,  and  the  reasons 
which  have  dictated  the  choice  made,  we  are  in  no  posi- 
tion to  consider  intelligently  any  proposed  departure 
from  this  practice. 

All  that  has  been  said  up  to  the  present  time  has  had 
for  its  purpose  to  make  clear  certain  fundamental  prop- 
ositions. These  are  : 

1.  That,  as  regards  the  administration  of  public  af- 
fairs,  Congress   occupies   precisely  the   position   of   a 
board  of  directors  of  a  private  corporation. 

2.  That  as  such  board  it  has  the  function  of  deter- 

122 


ALLOTMENT  OF  FUNDS 

mining,  in  general  terms  at  least,  what  such  public  cor- 
poration shall  do,  of  providing  the  funds  with  which 
such  work  may  be  done,  and  of  exercising  such  super- 
vision as  may  be  necessary  to  insure  that  its  will  is 
properly  carried  out. 

3.  That  in  discharging  these  functions,  it  is  desira- 
ble, if  the  maximum  of  economy  and  efficiency  is  to  be 
obtained,  that  it  should  formulate  its  directions  in  gen- 
eral terms,  make  available  funds  with  only  such  itemiza- 
tion  and  restrictions  as  are  necessary  to  insure  that  gen- 
eral policies  in  respect  to  work  are  carried  out,  and  leave 
to  the  persons  intrusted  with  the  actual  performance  of 
the  work  the  largest  practicable  discretionary  power. 

4.  That  such  a  policy  cannot  be  pursued  without 
grave  danger,  unless  at  the  same  time  effective  means 
are  provided  by  which  Congress  may  exert  a  rigid  super- 
vision over  the  manner  in  which  this  large  grant  of 
authority  is  exercised :  just  in  proportion  as  authority  is 
given,  means  of  supervision  must  be  strengthened. 

5.  That  this  policy,  which  Congress  itself  would 
probably  admit  to  be  the  correct  one,  is  not  now  pursued, 
because,  in  point  of  fact,  adequate  means  for  exercising 
such  supervision  are  not  now  available  to  it,  and, 

6.  As  a  logical  deduction  from  the  foregoing,  that  a 
change  to  the  correct  policy  can  only  be  expected  as  the 
result  of  the  provision  of  such  means. 


Outline"  of  Proposed  Plan  for  Allotting  Funds  by  Exec- 
utive Officials.  It  is  the  purpose  of  this  paper  to  sug- 
gest a  procedure  which,  in  the  opinion  of  the  writer, 
will,  if  consistently  carried  out,  furnish  such  means. 
This  procedure  consists  in  the  adoption,  as  a  matter 
of  legal  requirement,  of  what  has  been  termed  in  the 
title  of  this  paper  the  allotment  of  funds  by  executive 

123 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

officials.  By  allotment  of  funds  by  executive  officials 
is  meant  that  each  official  having  responsibility  for 
the  expenditure  of  funds  will,  immediately  upon  knowl- 
edge being  obtained  by  him  of  the  funds  that  will 
be  available  for  the  operations  of  his  service  during  the 
ensuing  fiscal  year,  proceed  to  formulate  an  administra- 
tive budget  or  sub-appropriation  scheme  setting  forth  in 
detail  how  he  proposes  to  expend  this  sum.  Many  serv- 
ices, to  a  greater  or  less  extent,  at  the  present  time  do 
something  in  the  way  of  attempting  to  determine  in  ad- 
vance how  money  at  their  disposal  will  be  expended. 
What  is  proposed  is  something  quite  different  from  this. 
The  proposal  here  made  is:  (i),  that  the  allotment  of 
funds  in  this  way  shall  be  a  matter  of  legal  requirement 
instead  of  depending  merely  upon  the  individual  wills 
of  the  several  service  chiefs;  (2),  that  this  allotment 
shall  be  formally  made  in  writing,  with  the  result  that 
there  will  be  brought  into  existence  an  appropriation 
document  differing  in  no  essential  feature  as  regards 
form  from  an  appropriation  act  enacted  by  Congress; 
(3),  that  allotment  ledgers  shall  be  opened  up  in  the 
accounting  offices  of  the  services  corresponding  to  the 
appropriation  ledgers  maintained  by  the  accounting 
offices  of  the  treasury  department;  (4),  that  changes  in 
the  allotment  of  funds  thus  made  shall  only  be  made  by 
formal  action  in  writing  on  the  part  of  the  allotting 
authority;  and  (5),  that  the  financial  reports  of  the 
services  shall  clearly  set  forth  the  allotment  scheme  as 
originally  established,  all  changes  subsequently  author- 
ized and  the  expenditures  actually  made  under  each 
allotment  head. 

It  will  be  seen  that  what  is  here  proposed  is,  in  effect, 
the  establishment  by  law  of  a  formal  scheme  of  admin- 
istrative sub-appropriations.  The  term  "allotment"  is 

124 


ALLOTMENT  OF  FUNDS 

used  merely  for  the  purpose  of  better  distinguishing  be- 
tween such  appropriations  and  those  made  by  Congress. 
Its  adoption  would  mean  the  creation  of  a  chain  or  logi- 
cal scheme  of  successive  appropriation  acts,  each  succes- 
sive act  supplementing  the  one  preceding  and  fixing  in 
greater  detail  the  assignment  of  funds  to  particular  ob- 
jects. Under  this  system  Congress  will  limit  its  action 
to  the  assignment  of  funds  by  main  heads.  The  secre- 
taries of  the  departments  will  take  up  the  work  where 
Congress  leaves  off  and  make  a  further  assignment  of 
funds.  The  bureau  chiefs  will,  in  turn,  allot  these  sums 
in  still  greater  detail  to  the  support  of  particular  sub- 
divisions of  the  work,  or  the  support  of  particular  units 
of  organization,  this  process  continuing  as  far  as  the 
conditions  existing  in  the  several  services  render  de- 
sirable. 

Advantages  of  Proposed  Plan.  There  are  a  number  of 
features  of  this  system,  some  of  which  will  immediately 
suggest  themselves ;  others  are  not  evident  except  as  an 
attempt  is  made  to  follow  it  in  actual  operation. 

In  the  first  place  it  means  the  substitution  of  a  flex- 
ible for  a  rigid  appropriation  scheme.  Where  the  as- 
signment of  funds  is  made  in  detail  by  Congress  there 
is  little  or  no  possibility  of  changing  assignments  to 
meet  new  conditions.  If  the  amounts  assigned  to  spe- 
cific objects  prove  to  be  inadequate  there  is  practically 
no  remedy  and  the  government  service  suffers;  if  too 
large,  the  evil  is  scarcely  less  great.  As  the  appropria- 
tion is  made  for  a  specific  object  any  balance  unused 
must  be  covered  back  into  the  treasury.  As  such  bal- 
ance is  thus  not  available  to  the  service  making  it  for 
use  by  it  for  other  purposes,  all  or  nearly  all  incentive 
is  removed  for  realizing  economies. 

125 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

Under  the  allotment  scheme  here  proposed,  conditions 
would  be  exactly  reversed.  Were  it  possible  to  apply 
balances  of  appropriations  resulting  from  economical 
administration  to  other  needs  of  the  service,  a  strong 
stimulus  to  keep  down  expenditures  would  be  imme- 
diately introduced.  Not  only  would  the  original  assign- 
ment of  funds  to  specific  objects  be  made  by  persons 
having  direct  and  intimate  knowledge  of  needs  to  be 
met,  but  changes  could  be  made  in  such  assignment  from 
day  to  day  as  altered  conditions  required.  The  appro- 
priating authority  as  regards  details  would  be  the  secre- 
tary or  bureau  chief  as  the  case  might  be.  All  that 
would  be  required  would  be  the  execution  of  an  admin- 
istrative order  directing  the  transfer  of  allotment^  as 
required. 

Requirements  of  Proposed  Plan.  In  calling  attention  to 
this  feature  of  the  scheme,  the  writer  wishes  again 
to  emphasize  the  imperative  necessity  that  all  proceed- 
ings under  it  should  be  of  a  formal  character,  in  writ- 
ing, and  made  a  matter  of  record.  The  whole  scheme 
would  break  down  unless  these  elements  were  present. 
This  means  that  no  change  should  be  made  in  an  allot- 
ment except  upon  a  formal  request  in  writing  on  the 
part  of  the  officer  desiring  the  change  in  which  the  justi- 
fication for  the  request  is  set  forth  and  that  the  action 
taken  upon  the  request  should  likewise  be  embodied  in  a 
writing  of  similar  character.  These  requirements  mean 
not  only  that  greater  care  will  be  taken  by  subordinate 
officials  in  estimating  their  needs  and  in  formulating 
their  requests  to  their  superiors  for  the  allotment  of 
funds,  but  that  they  will  only  ask  for  increased  funds 
when  absolutely  required.  Each  officer  will  be  under  a 
powerful  incentive  not  only  to  keep  within  his  limits  but 

126 


ALLOTMENT  OF  FUNDS 

so  to  run  his  service  as  to  realize  a  saving  if  possible. 
He  will  know  that  his  record  as  an  administrator  will 
be  much  better  if  he  can  realize  funds  for  other  needs 
than  if  he  has  to  be  constantly  running  to  his  superior 
with  requests  for  further  allotments.  This  will  be  as 
true  of  the  manager  of  the  field  station  as  of  the  bureau 
chief.  There  will  then  be  an  incentive  to  economy  all 
down  the  line  such  as  does  not  exist  and  cannot  exist 
under  present  conditions.  It  is  the  opinion  of  the  writer 
that  it  is  hopeless  to  expect  any  permanent  and  material 
improvement  in  respect  to  the  economy  and  efficiency 
with  which  governmental  affairs  are  managed  until  the 
system  of  government  and  its  technical  methods  are  so 
organized  as  to  establish  as  a  normal  feature  of  its  op- 
eration a  real  continuing  incentive  on  the  part  of  those 
in  authority  to  perform  their  duties  with  all  the  econ- 
omy and  efficiency  of  which  they  are  capable.  It  is  one 
of  the  prime  merits  of  the  allotment  plan  here  proposed 
that  it  lends  itself  to  the  introduction  of  such  a  feature. 
In  the  second  place  such  a  scheme  of  allotments  and 
allotment  ledger  accounts  would  bring  into  existence  a 
system  of  financial  records  in  each  department  or  serv- 
ice through  which  the  administrative  heads  would  be 
kept  in  constant  and  immediate  touch  with  the  progress 
of  work  under  their  direction.  The  allotments  in  the 
first  instance  would  be  made  on  the  estimates  and  sup- 
porting documents  submitted  by  the  chiefs  of  divisions, 
field  stations  and  the  like  to  the  bureau  chiefs  and  by 
the  latter  to  the  secretaries  of  the  departments.  The 
receipt  and  examination  of  these  estimates  and  explana- 
tory remarks  would  automatically  compel  each  official 
exercising  higher  authority  annually  to  review  the  work 
being  prosecuted  under  his  direction,  consider  proposals 
for  new  work  and  map  out  a  program  for  the  ensuing 

127 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

year.  With  this  program  embodied  in  its  allotment  ap- 
propriation document,  the  corresponding  ledger  accounts" 
would  show  from  month  to  month  how  the  work,  from 
a  financial  standpoint,  was  progressing.  As  no  addi- 
tional expenditure  could  be  incurred  without  his  express 
authorization,  the  allotting  authority  would  perforce 
have  brought  to  his  attention  all  contemplated  changes 
of  importance.  The  administration  would  thus  have, 
what  he  now  too  often  lacks,  a  systematic  scheme  of 
accounts  enabling  him  to  keep  currently  informed  re- 
garding conditions  and  operations  of  the  services  under 
his  charge.  Full  opportunities  would  be  afforded  for 
comparing  one  station  or  branch  of  the  service  with  an- 
other as  regards  the  same  subdivision.  Upon  this 
scheme  could  then  be  built  up  a  cost-keeping  and  unit 
efficiency  record  such  as  should  exist  in  all  services. 

Control  by  Congress  Preserved  under  Proposed  Plan. 

Turning  now  to  the  relation  of  this  system  to  Con- 
gress, the  significant  features  of  the  system  are:  that 
it  integrates  perfectly  with  the  appropriation  acts;  that 
while  conferring  large  discretion  upon  executive  officers 
it  compels  these  officers  to  act  as  formally  as  does  Con- 
gress itself;  that  it  makes  it  obligatory  upon  them  to 
promulgate  an  official  sub-appropriation  act;  that  no 
change  can  be  made  in  such  measure  except  by  way  of 
formal  amendment;  that  the  same  obligation  is  then 
placed  on  executive  officers  to  canvass  carefully  each 
year  the  prospective  needs  of  their  services  as  circum- 
scribed by  the  appropriation  acts  relating  to  them  and 
of  embodying  their  conclusions  in  a  definite  document; 
that  systematic  records  will  be  kept  of  all  changes  made 
in  the  provisions  of  such  document  as  first  promulgated 
and  all  expenditures  actually  made  in  accordance  with  it. 

128 


ALLOTMENT  OF  FUNDS 

All  these  data  will  not  only  be  a  matter  of  public 
record  but  properly  should  be  set  forth  in  the  annual 
report  and  estimates  submitted  by  the  administration 
for  funds  for  the  ensuing  year.  Indeed  the  scheme 
might  well  provide  that  the  allotments  in  the  first  in- 
stance should  be  made  by  a  certain  date  and  copies  of 
the  allotment  documents  forwarded  to  the  Secretary  of 
the  Treasury,  and  the  clerks  of  the  Senate  and  House  or 
clerks  of  the  appropriation  committees  of  these  bodies. 
These  could  be  assembled  in  such  a  way  that  when  re- 
printed they,  in  connection  with  the  appropriations  bill, 
would  furnish  a  statement  showing  in  detail  its  assign- 
ment of  funds  for  the  year's  operations.  If  deemed  de- 
sirable the  law  might  provide  that  copies  of  all  docu- 
ments authorizing  changes  in  allotments  as  thus  made 
should  be  forwarded  to  the  same  officers.  Congress  will 
thus  be  able  to  determine  for  itself  just  what  disposi- 
tion of  funds  has  been  made,  what  changes  have  been 
made  over  prior  practice,  whether  certain  sections  of 
the  country,  stations,  lines  of  work,  etc.,  have  been  un- 
duly preferred.  Executive  officials  thus  become  true 
agents  of  Congress  in  solving  its  general  problem  of 
assigning  funds  for  the  conduct  of  the  government. 
Congress  will  continue  to  determine  the  character  of  the 
activities  that  shall  be  undertaken,  to  provide  the  fund 
that  shall  be  available  for  such  work  and  to  supervise 
its  execution.  Instead  of  attempting,  however,  the  im- 
possible task  of  controlling  through  minute  and  inflex- 
ible instructions,  it  will  control  through  definitely  locat- 
ing responsibility  and  requiring  records,  reports  and  pro- 
cedure of  such  a  character  as  will  enable  it  readily  to 
determine  the  manner  in  which  authority  delegated  has 
been  exercised. 


129 


CHAPTER  VIII 

THE  MOVEMENT  FOR  BUDGETARY  REFORM 
IN  THE  NATIONAL  GOVERNMENT 

Whether  or  not  one  agrees  with  all  the  positions  that 
have  been  taken  with  regard  to  tjie  nature  and  func- 
tions of  a  budget,  it  is  difficult  to  escape  the  conviction 
that  in  the  introduction  of  a  properly  devised  budgetary 
system  lies  the  chief  hope  of  effecting  a  fundamental 
improvement  in  the  admittedly  unsatisfactory  condi- 
tions that  prevail  in  the  administration  of  public  affairs 
in  the  United  States.  There  is,  indeed,  a  practical  con- 
sensus of  opinion  as  to  this  among  students  of  govern- 
ment and  those  public  officials  who  have  sought  to  im- 
prove existing  administrative  methods,  and  it  is  a  strik- 
ing fact  that  every  instance  in  which  the  administrative 
system  of  a  city  or  a  state  or  of  the  national  govern- 
ment has  been  subjected  to  a  special  study  with  a  view 
to  suggesting  means  by  which  it  may  be  made  more 
efficient,  the  budget  has  been  brought  forward  as  an 
essential  step.  In  this  connection,  the  significant  fact 
may  further  be  mentioned  that,  among  all  the  modern 
constitutional  states  of  the  world,  the  United  States  is 
the  only  one  that  has  sought  to  operate  without  what 
may  properly  be  termed  a  budget. 

For  many  years  there  has  been  profound  dissatisfac- 
tion, both  inside  and  outside  of  Congress,  with  the  man- 
ner in  which  that  body  performs  its  task  of  passing  upon 
the  estimates  and  determining  what  funds  shall  be  voted 

130 


MOVEMENT  FOR  BUDGETARY  REFORM 

for  the  conduct  of  the  government.  This  phase  of  budg- 
etary reform  has  thus  long  received  attention,  though 
it  must  be  confessed  that  few  concrete  suggestions  have 
been  made  effecting  an  improvement  in  the  system  and 
that  one  would  hardly  be  justified  in  saying  that  there 
was  a  real  movement  for  reform  in  this  respect.  This, 
moreover,  is  a  phase  of  financial  reform  that  it  is  ex- 
pected will  be  handled  fully  in  a  volume  now  under  prep- 
aration by  the  Institute  for  Government  Research,  deal-, 
ing  with  the  system  of  financial  administration  of  the 
United  States  government  in  all  its  aspects.  We  are 
here  concerned  only  with  the  definite  movement  which 
has  been  under  way  for  a  number  of  years,  having  for 
its  purpose  the  establishment  of  a  system  under  which 
the  President  shall  annually  prepare  and  submit  to  Con- 
gress a  true  budget,  and  that  Congress  shall  so  change 
its  methods  of  procedure  for  the  consideration  and  tak- 
ing of  action  upon  finance  measures  as  will  ensure  that 
this  budget  is  treated  as  such. 

Historical  Development  of  Present  Estimates  System. 

To  understand  this  movement,  it  is  necessary  to  de- 
scribe briefly  the  present  situation  in  respect  to  the 
preparation  and  submission  to  Congress  of  estimates. 

The  principle  that  the  administration  should  furnish 
to  Congress  an  estimate  of  the  revenue  and  expenditure 
needs  of  the  government  was  established  from  the  be- 
ginning of  the  government.  The  officer  directed  to  do 
this,  however,  was  not  the  President  but  the  Secretary  is 
of  the  Treasury.  Thus  the  act  of  September  2,  1789,* 
establishing  the  Treasury  Department,  made  it  the  duty 
of  the  Secretary  of  the  Treasury  "to  prepare  and  report 

1 1  Stat,  65. 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 
estimates  of  the  public  revenues  and  the  public  expendi- 


tures." 


This  act  was  supplemented  by  one  passed  May  10, 
iSoo,1  which  directed  the  Secretary  of  the  Treasury,  at 
the  commencement  of  each  session  of  Congress,  to  lay 
before  that  body  a  report  "on  the  subject  of  finance, 
containing  estimates  of  the  public  revenues  and  public 
expenditures,  and  plans  for  improving  and  increasing 
the  revenues  from  time  to  time  for  the  purpose  of  giving 
information  to  Congress  in  adopting  modes  of  raising 
the  money  requisite  to  meet  the  public  expenditures." 
The  duties  thus  placed  on  the  Secretary  of  the  Treasury 
were  confirmed  by  the  act  of  August  26,  i842,2  chang- 
ing the  date  of  the  fiscal  year  so  that  it  would  begin 
July  i  instead  of  January  i,  as  in  the  past. 

These  early  provisions  of  law  are  significant  from 
several  standpoints.  The  first  is  that  the  duty  of  in- 
forming Congress  regarding  the  revenue  and  expendi- 
ture needs  of  the  government  was  placed  not  on  the 
President  but  on  the  Secretary  of  the  Treasury.  This, 
together  with  other  action  by  Congress  for  the  estab- 
lishment of  executive  departments,  the  determination 
of  the  duties  of  administrative  officers,  etc.,  shows 
clearly  that,  at  the  outset,  when  our  political  traditions 
and  practices  were  crystallizing,  Congress  had  no  inten- 
tion of  establishing  the  President  in  the  position  of  head 
of  the  administration  in  the  technical  acceptation  of  the 
term.  It  was  its  idea  that  administrative  authority  re- 
sided in,  and  would  be  exercised  by,  itself,  and  that  the 
heads  of  departments  would  be  but  its  agents  for  carry- 
ing out  its  determinations.  It  thus  had  no  intention  of 
bringing  into  existence  an  integrated  administrative 

1 2  Stat.,  79. 
a5  Stat.,  536. 

132 


MOVEMENT  FOR  BUDGETARY  REFORM 

system  with  the  President  at  its  head  as  administrator 
in  chief. 

On  the  other  hand,  the  wording  of  the  original  act 
shows  that  it  was  the  intention  of  Congress  that  the 
Secretary  of  the  Treasury  should  have  more  than  mere 
ministerial  duties  to  perform,  and  that  it  should  be 
within  his  province  to  submit  suggestions  for  increasing 
the  revenues  of  the  government.  Opportunity  was  thus 
presented  for  the  exercise  by  the  Secretary  of  consider- 
able influence  upon  Congress,  and  even  for  the  develop- 
ment of  budgetary  methods.  Unfortunately,  however, 
for  reasons  which  cannot  be  here  given,  this  practice 
never  took  root. 

The  jealousy  and  hostility  engendered  between  the 
legislative  and  executive  branches  of  the  government 
was  such  that  Congress  encouraged  executive  decentral- 
ization in  budgetary  matters.  Moreover,  the  chief  ex- 
ecutive neither  insisted  upon  his  evident  constitutional 
right  to  prepare,  nor  accepted  responsibility  for  submit- 
ting to  the  Congress,  a  definite  budget  as  an  administra- 
tive proposal,1  in  practice  he  did  not  incorporate  such 
proposal  in  his  annual  message,  nor  did  he  address  him- 
self to  Congress  by  special  message  on  the  subject.  In 
practice  the  somewhat  nebulous  concept  of  duty  of  the 
Secretary  of  the  Treasury  with  regard  to  the  submis- 
sion of  a  budget  as  an  administrative  measure,  after  the 
time  of  Alexander  Hamilton,  was  lost  sight  of.2 

Gradually  the  obligation  of  preparing  estimates  of 
expenditures  was  shifted  by  statute  law  upon  the  sev- 

1  Reference  is  here  made  to  the  constitutional  duty  imposed  upon 
the  President  "from  time  to  time  to  give  to  the  Congress  information 
of  the  state  of  the  Union  and  recommend  to  their  consideration  such 
measures   as   he    shall   judge   necessary   and   expedient."      (Art.    II, 
Sec.  3.) 

2  The  Need  for  a  National  Budget:     Message  from  the  President 
of   the   United    States   transmitting   Report   of   the    Commission   on 
Economy  and  Efficiency  on  the  Subject  of  the  Need  for  a  National 
Budget.    House  Doc.  No.  851,  62nd  Cong.,  2nd  Sess.,  1912. 

133 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

eral  departments  acting  independently  of  each  other, 
though  the  practice  was  preserved  of  having  these  esti- 
mates submitted  through  the  Secretary  of  the  Treasury. 
Neither  the  latter,  nor  the  President,  except  possibly  in 
a  few  cases  of  exceptional  importance,  took  the  position 
that  it  was  a  part  of  his  duties  to  subject  these  estimates 
to  revision  or  to  control  their  contents.  This  position 
in  respect  to  the  duty  to  prepare  and  submit  estimates 
of  expenditures  finally  found  definite  expression  in  the 
general  law  governing  the  preparation  and  submission 
of  the  estimates.  Thus  in  the  revision  of  the  statutes 
made  on  the  occasion  of  the  enactment  of  the  Revised 
Statutes  of  1873,  the  wording  of  the  law  was  so  changed 
as  to  make  it  read  that  the  duty  of  the  Secretary  of  the 
Treasury  to  submit  estimates  related  only  to  estimates 
"of  the  public  revenue  and  public  expenditure  then  cur- 
rent" 1  and  furthermore  that  "all  annual  estimates  for 
the  public  service  shall  be  submitted  to  Congress  through 
the  Secretary  of  the  Treasury." 

Though  the  wording  of  the  law  just  quoted  has  been 
slightly  changed  by  act  of  July  7,  i884,3  and  there  are 
many  other  provisions  of  law  regarding  the  form  and 
contents  of  estimates,  the  system  previously  established 
and  thus  made  definite  by  statute  that  the'  heads  of  de- 
partments should  prepare  the  estimates  for  their  respec- 
tive services  and  that  the  Secretary  of  the  Treasury 
should  be  the  mere  compiling  agent  and  channel  of 
transmission  has  ever  since  been  adhered  to. 

Thus  was  lost  the  opportunity  to  put  the  administra- 
tion of  the  affairs  of  the  national  government  upon  a 
budgetary  basis.  This  history  is  of  importance,  not  only 


Stat.,  Sec.  257. 
2  Ibid.,  Sec.  3669. 
"23  Stat.,  254. 


MOVEMENT  FOR  BUDGETARY  REFORM 

as  showing  how  present  conditions  came  about,  but  as 
supporting  the  statement  that  there  is  nothing  in  OUP 
constitutional  system  nor  in  our  early  history  that  stands 
in  the  way  of  the  national  government's  accomplishing 
this  important  reform.  All  that  is  required  is  that  the 
importance  of  this  reform  shall  be  appreciated  and  the 
means  for  its  accomplishment  determined. 

Basis  for  Adoption  of  Budget  System  Laid  by  Modern 
Conception  of  Place  of  President  in  Our  Political  Sys- 
tem. Coming  now  to  a  consideration  of  the  actual 
steps  that  have  been  taken  in  this  direction,  the  first 
point  to  be  noted  is  that  the  fundamental  basis  for  ef- 
fecting this  reform  has  been  laid  in  the  new  conception 
now  entertained  regarding  the  position  of  the  President 
as  the  responsible  head  of  the  administration.  Partly 
by  virtue  of  express  provisions  of  law  which  have 
placed  enormous  administrative  powers,  in  respect  to 
civil  as  well  as  military  matters,  in  the  hands  of  the 
President,  partly  as  the  logical  consequence  of  the 
powers  possessed  by  him  to  nominate  or  to  appoint  and 
to  dismiss  important  officers  of  the  government,  but 
chiefly  as  the  result  of  the  growing  conviction  on  the 
part  of  the  American  people  that  the  responsibility  is 
his,  the  President  has  come  to  be  accepted  as  the  admin- 
istrator in  chief  of  the  government;  not  in  the  sense  that 
the  source  of  administrative  authority  legally  resides  in 
him  but  that  he  is  responsible  for  seeing  that  the  admin- 
istrative affairs  of  the  government  are  honestly  and  effi- 
ciently conducted.  It  follows  logically  from  this  that 
his  is  the  duty  of  exercising,  subject  to  provisions  of 
law,  that  general  direction,  supervision  and  control  over 
all  administrative  officers,  heads  of  departments  as  well 
as  others,  and  of  recommending  to  Congress  what  pro- 

135 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

vision  shall  be  made  in  the  way  of  administrative  organ- 
ization, procedure,  and  work  and  what  funds  are  re- 
quired in  order  that  the  administrative  affairs  of  the 
government  may  be  properly  provided  for  and  con- 
ducted. ''This  carries  with  it  no  necessary  derogation 
of  the  ultimate  authority  and  power  of  Congress.  It 
merely  means  that  responsibility  for  the  conduct  of  the 
administrative  affairs  of  the  government  shall  be  cen- 
tralized; that  Congress  shall  look  to  one  officer,  the 
President,  instead  of  to  a  number  of  independent  offi- 
cials for  advice  in  respect  to  what  action  shall  be  taken 
by  it  in  the  field  of  administration.  Emphasis  has  been 
laid  upon  this  proposed  change  in  the  actual  working 
character  of  our  political  system  since  it  provides  the 
one  essential  basis  upon  which  it  will  be  possible  to  erect 
a  budgetary  system. 

As  in  the  case  of  the  movement  for  budgetary  reform 
in  the  individual  states,  efforts  looking  to  the  accom- 
plishment of  a  similar  reform  in  the  national  govern- 
ment undoubtedly  owe  their  origin  to  the  wide  interest 
evoked  by  the  work  of  bureaus  of  research  in  the 
municipal  field. 

Act  of  March  4,  1909,  Requiring  President  to  Submit 
Recommendations  as  to  How  Anticipated  Deficiencies 
May  Be  Met.  The  first  official  action  looking  to  a 
change  in  existing  conditions  was  the  insertion  in  the 
sundry  civil  appropriation  act  of  March  4,  1909,  of  a 
clause  imposing  upon  the  President  the  duty  of  recom- 
mending to  Congress  what  action  should  be  taken  in  the 
way  of  securing  increased  revenues  or  in  cutting  down 
appropriations  when  the  estimates,  as  submitted  by  the 
Secretary  of  the  Treasury,  show  estimated  appropria- 

136 


MOVEMENT  FOR  BUDGETARY  REFORM 

tions  in  excess  of  estimated  revenues.    This  clause  reads 
as  follows:1 

Immediately  upon  the  receipt  of  the  regular  annual 
estimates  of  appropriation  needed  for  the  various 
branches  of  the  Government  it  shall  be  the  duty  of  the 
Secretary  of  the  Treasury  to  estimate  as  nearly  as  may 
be  the  revenues  of  the  Government  for  the  ensuing 
fiscal  year,  and  if  the  estimates  for  appropriations,  in- 
cluding the  estimated  amount  necessary  to  meet  all  con- 
tinuing and  permanent  appropriations,  shall  exceed  the 
estimated  revenues,  the  Secretary  of  the  Treasury  shall 
transmit  the  estimates  to  Congress  as  heretofore  re- 
quired by  law  and  at  once  transmit  a  detailed  statement 
of  all  of  said  estimates  to  the  President,  to  the  end  that 
he  may,  in  giving  Congress  information  of  the  state  of 
the  Union  and  in  recommending  to  their  consideration 
such  measures  as  he  may  judge  necessary,  advise  the 
Congress  how  in  his  judgment  the  estimated  appropria- 
tions could  with  the  least  injury  to  the  public  service  be 
reduced  so  as  to  bring  the  appropriations  within  the 
estimated  revenues,  or,  if  such  reduction  be  not  in  his 
judgment  practicable  without  undue  injury  to  the  public 
service,  that  he  may  recommend  to  Congress  such  loans 
or  new  taxes  as  may  be  necessary  to  cover  the  deficiency. 

Though  no  specific  action  appears  ever  to  have  been 
taken  under  this  clause,  it  is  none  the  less  significant  as 
representing  a  distinct  step  on  the  part  of  Congress  to 
place  the  responsibility  for  making  recommendations  re- 
garding revenues  and  expenditures  upon  the  President. 

Concurrently  with  this  action  on  the  part  of  Congress, 
the  President  himself  on  his  own  initiative,  and  with 
the  same  object  in  view  of  bringing  estimated  appropria- 
tions within  estimated  revenues,  intervened  actively  in 
the  matter  of  the  formulation  of  estimates  of  expendi- 
tures. This  intervention  took  the  form  of  considering 

*35  Stat,  1027,  Sec.  7. 

137 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

in  Cabinet  general  policies  and  in  letting  the  members 
of  the  Cabinet  know  his  wishes  in  respect  to  the  reduc- 
tion in  estimates  as  first  prepared  rather  than  in  any 
detailed  revision  of  items  by  himself.  This  direct  inter- 
vention by  the  President  was  pointed  out  by  the  Secre- 
tary of  the  Treasury,  Hon.  Franklin  MacVeagh,  in  the 
opening  paragraph  of  his  annual  report  to  Congress  for 
1910  when  he  said: 

In  submitting  herewith  the  estimates  of  expenditures 
for  the  executive  departments  for  the  year  beginning 
July  i,  1911,  I  wish  to  call  attention,  as  I  did  last  year, 
to  the  exceeding  care  on  the  part  of  the  heads  of  depart- 
ments with  which  these  estimates  have  been  compiled 
under  the  immediate  direction  of  the  President.  There 
could  scarcely  be  more  scrutiny  given  to  the  work  of 
the  estimates  than  was  given  last  year  and  has  been 
given  this  year  by  the  President  and  the  members  of 
his  Cabinet. 

Recommendations  by  Secretary  of  the  Treasury,  Frank- 
lin MacVeagh,  for  a  Budget  System,  1909-1912.  This  ac- 
tion on  the  part  of  the  President,  like  that  of  the 
enactment  of  the  clause  in  the  sundry  civil  appropria- 
tion act  that  has  been  quoted,  is  of  importance  as  show- 
ing the  development  of  the  idea  of  the  responsibility  of 
the  President  for  the  estimates  as  submitted.  The  Sec- 
retary of  the  Treasury  was,  however,  by  no  means  of 
'the  opinion  that  this  general  consideration  of  estimates 
by  the  President  and  his  Cabinet  was  equivalent  to  the 
introduction  of  a  budgetary  system.  In  his  report  for 
the  preceding  year — 1909 — he  devoted  no  little  space  to 
urging  that  Congress  provide  for  the  establishment  of 
such  a  system.  He  said: 

The  absence  of  anything  like  a  budget  in  our  Govern- 
ment has  undoubtedly  led  to  a  great  deal  of  extravagant 

138 


MOVEMENT  FOR  BUDGETARY  REFORM 

appropriation.  Originally,  no  doubt,  it  was  contem- 
plated that  a  budget  should  be  presented  by  the  Secre- 
tary of  the  Treasury.  And  Alexander  Hamilton  began 
in  that  way.  But  the  complete  plan  of  a  budget  was 
never  fully  realized,  could  not  have  lasted,  and  cannot 
now  be  instituted.  The  elements  of  financial  responsi- 
bility of  such  a  system  as  the  English  have  all  been 
present,  but  the  separation  between  the  executive  and 
legislative  branches  has  prevented  these  elements  from 
getting  together.  And,  unfortunately,  the  responsibility 
for  the  adjustment  of  revenues  and  appropriations  in- 
stead of  drifting  toward  an  efficient  system  of  legisla- 
tive and  executive  cooperation,  devised  as  best  it  could 
be  in  our  form  of  government,  has  drifted  always 
toward  an  elimination  of  the  responsibility  of  the  execu- 
tive branch.  It  finally  came  to  the  point  where  the  ex- 
ecutive had  little  or  nothing  to  say  about  the  revenues, 
and  where  the  executive  estimates  of  expenditures  were 
constructed  more  or  less  for  trading  purposes  with  the 
appropriation  committees.  On  the  other  hand,  the  Con- 
gress, into  whose  hands  the  control  so  largely  came,  was 
obliged  to  meet  these  economic  and  business  responsi- 
bilities with  an  organization  that  made  revenue  ques- 
tions necessarily  political  and  partisan,  and  which  turned 
over  the  separate  appropriation  bills  to  a  series  of  unre- 
lated committees  which  were  obliged  to  deal  with  them 
in  singular  isolation.  In  neither  house  of  Congress  was 
there  a  correlation  or  cooperation  of  these  committees. 

In  this  way  the  Government  arrived  at  the  farthest 
extreme  from  a  responsible  budget.  The  demand  for 
something  better  has  undoubtedly  arisen,  and  has  al- 
ready taken  form  in  a  marked  attempt  on  the  part  of 
the  Congress  to  organize  these  important  responsibili- 
ties. In  March  last  there  was  incorporated  in  the  sundry 
civil  appropriation  bill  the  following  provision:  (See 
clause  quoted  above.) 

Then  followed  the  announcement  of  the  President 
favoring  a  reduction  in  appropriations  and  an  earlier 
and  more  thorough  consideration  of  the  estimates  by 

139 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

the  heads  of  the  departments.  It  was  determined  that 
instead  of  the  former  system,  by  which  each  member  of 
the  Cabinet  had  sent  his  own  department  estimates  to 
the  Congress  without  any  common  consideration  of  all 
the  estimates  by  the  whole  Cabinet,  the  estimates  of  all 
the  departments  should  be  reported  to  the  President  and 
the  Cabinet  and  be  considered  by  them  with  a  view  to  a 
relationship  to  the  expected  revenues.  This  was  a  de- 
cided step  toward  a  more  rational  dealing  with  these 
great  questions. 

Then  came  the  action  of  the  Senate  appointing  a  Com- 
mittee on  Expenditures,  including  the  chairmen  of  the 
separate  committees  having  charge  of  appropriation 
bills,  with  a  view  of  binding  together  the  work  of  these 
committees,  and  of  having  it  all  passed  upon  together 
and  in  common,  thus  tending  toward  making  the  appro- 
priations of  Congress  one  appropriation  instead  of 
many.  All  of  this  is  the  beginning  of  an  organization 
of  the  fiscal  responsibilities  of  the  executive  and  legisla- 
tive branches  of  the  Government.  These  beginnings 
should  be,  and  I  believe  will  be,  conserved  and  developed. 

It  is  too  early  to  say  what  final  form  this  reorganiza- 
tion of  the  fiscal  responsibilities  will  take,  but  it  is  fair 
to  hope  that  there  will  be  constant  progress  away  from 
the  extreme  disorganization  of  the  past.  Even  if  our 
country  is  rich  it  cannot  afford  to  be  wholly  unscientific 
in  its  appropriations. 

In  his  reports  for  1910  and  1911  he  again  reverts  to 
the  subject.  In  the  first  he  wrote: 

There  was  a  promise  in  the  air  a  year  ago,  to  which 
I  made  reference  in  my  annual  report,  of  an  organized 
coordination  of  appropriation  bills  among  themselves, 
and  of  revenue  estimates  and  other  estimates  with  ap- 
propriation bills,  and  of  an  organized  cooperation  be- 
tween the  executive  and  the  legislative  departments, 
with  a  view  to  securing  as  far  as  possible  the  advan- 
tages other  governments  enjoy  by  reason  of  the  budget 

140 


MOVEMENT  FOR  BUDGETARY  REFORM 

system.    I  regret  to  say  that  the  movement  has  not  as 
yet  gone  far. 

The  expectation,  therefore,  that  we  were  making 
progress  toward  such  correlation  of  the  separate  appro- 
priation bills  as  would  make  the  appropriations  of  Con- 
gress practically  one  bill,  has  not  yet  been  justified. 
Each  executive  department  has  held  down  or  reduced 
its  estimates  under  the  direction  or  inspiration  of  the 
President,  and  phenomenal  results  on  this  line  have  been 
achieved.  There  has  been,  however,  no  permanent  sys- 
tem of  new  control  or  new  study  of  the  relations  of 
outgo  and  income  established.  That  seemingly  is  im- 
possible without  full  and  established  cooperation  be- 
tween the  legislative  and  executive  departments.  As 
long  as  the  system  remains  as  it  is,  with  the  responsi- 
bilities for  estimates  and  appropriations  divided  into  as 
many  atoms  as  there  are  executive  departments  and  in- 
dependent establishments  and  appropriating  committees 
of  Congress,  there  can  be  no  permanent  reform.  The 
question  of  the  expenditures  of  a  great  government  like 
ours  is  altogether  too  large  and  too  complex  to  be  scien- 
tifically handled  by  anything  but  a  thoroughly  organized 
responsibility  which  shall  represent  both  the  legislative 
and  executive  departments.  It  would  seem  that  there 
must  be  formed  some  kind  of  a  budget  board,  or  budget 
committee,  representative  of  the  two  departments  of 
government,  which  shall  make  the  necessary  studies  and 
recommendations. 

Unfortunately  the  expectations,  or  rather  hopes,  of 
the  Secretary  were  not  realized,  and  he  was  forced  in 
his  following  report,  that  for  1911,  to  write: 

The  impulse  toward  the  development  of  so  much  of  a, 
responsible  budget  system  as  our  form  of  government 
will  permit  was  very  much  in  evidence  a  couple  of  years 
ago.  It,  however,  has  not  been  sustained  and  has  almost 
disappeared.  I  have  referred  to  the  matter  in  my  pre- 
vious annual  reports,  and  feel  as  strongly  as  ever  that 

141 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

something  should  be  done  to  organize  the  divided  con- 
sideration now  given  the  expenditures  of  the  Govern- 
ment and  the  interrelation  of  its  income  and  outgo.  The 
responsibilities  relative  to  estimates,  appropriations  and 
revenues  are  extremely  scattered  and  disintegrated. 
The  vast  sums  that  pass  through  the  Treasury  coming 
and  going  are  without  any  centralized  study  or  recom- 
mendation such  as  other  countries  find  it  necessary  to 
give  to  their  Government  finances.  We  shall  have  to 
continue  to  divide  this  important  work  between  the  ex- 
ecutive and  the  legislative  departments  of  the  Govern- 
ment. There  should,  however,  be  found  a  way  to  organ- 
ize the  work  done  in  the  executive  department  and  to 
organize  the  work  done  in  the  legislative  department, 
and  then  to  establish  a  responsible  cooperation  between 
the  two.  To  map  out  a  new  system  will  require  thor- 
ough study ;  and  to  arrange  for  this  it  would  seem  to  be 
necessary  for  the  Congress  to  appoint  a  commission 
representative  of  the  executive  and  legislative  depart- 
ments of  the  Government  And  I  hope  Congress  may 
be  interested  enough  to  appoint  such  a  commission  dur- 
ing its  present  session. 

That  the  Secretary  continued,  however,  in  his  opinion 
that  the  introduction  of  a  budgetary  system  was  an 
urgent  need  is  shown  by  his  statement  in  his  succeeding 
annual  report  for  1912  that: 

In  all  of  my  reports  to  the  Congress,  I  have  called 
attention  to  the  absence,  in  our  governmental  machinery, 
of  anything  in  the  nature  of  a  budget;  and  while  recog- 
nizing the  difficulties  in  establishing  a  budget  under  our 
form  of  government,  have  each  year  thought  it  neces- 
sary to  urge  the  importance  and  practical  necessity  of 
overcoming  these  difficulties. 

The  President  will  now  deal  with  this  matter  elab- 
orately ;  and  it  is  no  longer  necessary  for  me  to  do  more 
than  renew  the  expressions  of  my  interest  in  it. 

142 


MOVEMENT  FOR  BUDGETARY  REFORM 

Advocacy  of  a  Budget  System  by  President  Taft 
and  His  Commission  on  Economy  and  Efficiency,  1911- 
1913.  The  allusion  here  made  by  the  Secretary  to  the 
President  dealing  with  the  matter  more  elaborately 
brings  us  to  the  next  important  step  taken  by  the  na- 
tional administration  looking  to  the  adoption  of  a  budg- 
etary system.  In  accordance  with  the  direct  request 
by  the  President  the  following  clause  was  inserted  in 
the  sundry  civil  appropriation  act  for  1911,  approved 
June  25,  1910: 1 

To  enable  the  President,  by  the  employment  of  ac- 
countants and  experts  from  official  and  private  life  to 
more  effectively  inquire  into  the  methods  of  transacting 
the  public  business  of  the  Government  in  the  several  ex- 
ecutive departments  and  other  Government  establish- 
ments, with  the  view  of  inaugurating  new  or  changing 
old  methods  of  transacting  such  public  business  so  as  to 
attain  greater  efficiency  and  economy  therein,  and  to 
ascertain  and  recommend  to  Congress  what  changes  in 
law  may  be  necessary  to  carry  into  effect  such  results  of 
his  inquiry  as  cannot  be  carried  into  effect  by  executive 
action  alone,  and  for  each  and  every  purpose  necessary 
hereunder,  including  the  employment  of  personal  service 
at  Washington,  District  of  Columbia,  or  elsewhere,  one 
hundred  thousand  dollars. 

In  pursuance  of  the  power  thus  conferred  upon  him 
the  President  directed  his  secretary,  Mr.  Charles  D. 
Norton,  to  undertake  a  preliminary  inquiry  regarding 
the  methods  of  conducting  the  government's  business 
and  of  formulating  a  plan  for  a  more  systematic  investi- 
gation. Dr.  Frederick  A.  Cleveland  was  selected  to  have 
immediate  charge  of  this  inquiry.  On  March  8,  1911, 
there  was  established  a  commission  to  which  was  given 
the  name  of  "The  President's  Commission  on  Economy 
'36  Stat.,  703,  1910. 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

and  Efficiency"  to  take  on  the  work  which  had  been 
begun  under  the  personal  direction  of  Dr.  Cleveland, 
who  continued  as  chairman  of  the  new  commission.1 

Following  the  wishes  of  the  President,  this  Commis- 
sion devoted  a  large  part  of  its  energies  to  a  considera- 
tion of  the  problems,  having  to  do  with  the  administra- 
tion of  the  financial  affairs  of  the  government.  Upon 
the  constructive  side  it  reached  the  conclusion  that  no 
satisfactory  system  could  be  established  that  did  not 
have  as  its  central  feature  the  use  of  a  budget.  This 
conclusion  was  set  forth  at  length  with  a  wealth  of  sup- 
porting documents  in  a  report  which  was  transmitted 
to  Congress  by  the  President  in  19 12.2 

The  letter  of  the  President  transmitting  the  report, 
and  thus  constituting  a  part  of  the  document,  presents 
so  clearly  and  authoritatively  the  need  for  a  budget  and 
the  arguments  in  favor  of  the  adoption  of  such  an  in- 
strument for  the  administration  of  the  national  finances 
that  it  is  here  reproduced  in  full  as  an  appendix  to  this 
volume. 

In  the  following  year,  1913,  the  Commission  on  Econ- 
omy and  Efficiency  prepared,  and  the  President  sent  to 
Congress,  another  report  in  which  the  attempt  was  made 

aThe  other  members  of  the  Commission  were  Prof.  Frank  J. 
Goodnow,  then  professor  of  public  law,  Columbia  University,  and  now 
President  of  the  Johns  Hopkins  University;  W.  W.  Warwick,  then 
chief  accounting  officer  of  the  Panama  Canal  Commission  and  now 
comptroller  of  the  U.  S.  Treasury;  Mr.  Harvey  S.  Chase,  certified 
accountant  of  Boston,  Mass.,  who  had  long  been  at  the  forefront  of 
the  movement  for  the  improvement  of  methods  of  financial  adminis- 
tration by  municipalities  and  other  public  bodies,  and  the  author  of 
the  present  volume  who  at  the  time  was  Assistant  Director  of  the 
Bureau  of  the  Census.  Mr.  Merrit  O.  Chance,  then  Auditor  for  the 
Post  Office  and  now  Postmaster  for  the  District  of  Columbia,  was 
the  Secretary  and  later  a  member  of  the  Commission. 

8  "The  Need  for  a  National  Budget.  Message  from  the  President 
of  the  United  States,  Transmitting  Report  of  the  Commission  on 
Economy  and  Efficiency  on  the  Subject  of  the  Need  for  a  National 
Budget."  House  Doc.  No.  851,  62d  Cong.,  2d  Sess.,  1912. 

144 


MOVEMENT  FOR  BUDGETARY  REFORM 

to  throw  the  data  available  regarding  expenditures  and 
estimates  into  the  form  of  a  budget.1  The  object 
sought  in  the  preparation  and  submission  of  this  report 
was  to  get  before  Congress  a  concrete  example  of  the 
character  of  the  information  afforded  by  a  budget.  It 
was  not  expected  that  any  positive  action  on  it  would 
be  had. 

On  June  30,  1913,  the  Commission  went  out  of  exist- 
ence due  to  the  failure  of  Congress  to  make  provision 
for  its  further  support.  Though  no  tangible  result  fol- 
lowed from  the  work  of  the  Commission  and  the  per- 
sonal efforts  of  the  President  on  behalf  of  the  adoption 
by  the  national  government  of  a  budgetary  system,  there 
can  be  little  question  that  to  its  work  is  due  in  no  small 
degree  the  growing  demand  on  the  part  of  the  public  for 
the  accomplishment  of  this  reform. 

It  need  hardly  be  said  that  if  this  reform  is  to  be  se- 
cured Congress  must  be  convinced  of  both  its  desira- 
bility and  its  feasibility.  It  is  exceedingly  unfortunate 
that  as  yet  the  character  of  the  reform  as  it  affects  con- 
gressional powers  and  action  is  largely  misconceived  by 
that  body.  In  the  opinion  of  the  writer  a  mistake  has 
been  made  by  those  advocating  the  reform  in  featuring 
so  prominently  the  demand  for  what  is  known  as  an 
executive,  as  opposed  to  a  legislative  budget.  In  the 
present  volume  every  effort  has  been  made  to  make  clear 
that  the  adoption  of  a  budgetary  system  does  not  neces- 
sarily carry  with  it  any  diminution  in  the  powers  of 
Congress  as  the  final  determining  authority  in  respect 
to  the  raising  and  expending  of  the  national  revenue. 
On  the  contrary,  the  primary  function  of  a  budget  is  to 

1  "Messages  of  the  President  of  the  United  States  Submitting  for 
the  Consideration  of  the  Congress  a  Budget,  with  Supporting  Mem- 
oranda and  Reports."  Senate  Doc.  No.  1113,  62d  Cong.,  3d  Sess.,  1913. 

145 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

get  before  Congress  the  information  regarding  the  state 
of  the  national  finances,  revenues  and  expenditures  in 
the  past,  and  estimated  revenues  and  expenditures  for 
the  year  to  come,  in  such  a  form  that  Congress  can  per- 
form its  functions  as  a  fund-raising  and  fund-granting 
organ  more  effectively  than  it  can  possibly  do  under 
present  conditions. 

From  the  congressional  standpoint  budgetary  reform 
thus  has  two  phases :  one,  the  securing  from  the  Execu- 
tive of  financial  data  in  proper  form,  that  is,  in  the 
form  of  a  budget;  and,  two,  the  revision  of  its  own 
methods  of  procedure  in  acting  upon  such  budgetary 
proposals.  Involved  in  the  latter  is,  of  course,  the  ques- 
tion as  to  the  extent  to  which  Congress,  in  revising  its 
rules  of  procedure,  will  limit  or  place  safeguards  around 
its  right  to  modify  executive  proposals  or  recommen- 
dations emanating  from  its  own  committees  on  appro- 
priations, or  will  institute  other  reforms,  as,  for  ex- 
ample, the  consideration  of  all  appropriation  or  finance 
bills  by  a  single  committee. 

Movement  for  Establishment  of  a  Single  Committee  on 
Appropriations  in  the  House.  Though  Congress  is 
by  no  means  prepared  at  this  time  to  accept  the  prin- 
ciple of  an  executive  budget,  it  is  certain  that  there  is 
a  general  conviction  on  the  part  of  its  members  that 
the  present  system  of  voting  funds  is  unsatisfactory. 
Of  this  no  one  is  more  firmly  convinced  than  Mr.  Fitz- 
gerald, who  for  some  years  was  the  chairman  of  the 
House  Committee  on  Appropriations.  Repeatedly  he 
contended  for  the  fundamental  principle  lying  at  the 
basis  of  a  budget,  namely,  that  responsibility  both  for 
the  preparation  of  estimates  and  for  action  upon  them 

146 


MOVEMENT  FOR  BUDGETARY  REFORM 

must  be  concentrated  and  the  present  diffusion  of  re- 
sponsibility corrected. 

In  his  speech  in  the  House  of  Representatives,  March 
4,  1913,  in  which,  in  conformity  with  established  cus- 
tom, the  chairman  of  the  Committee  on  Appropriations 
sums  up  the  action  of  the  House  during  the  session  in 
respect  to  the  granting  of  appropriations,  he  said: 

In  my  opinion  all  of  the  appropriation  bills  should  be 
prepared  in  one  committee.  It  is  the  only  logical 
method.  .  .  . 

If  the  House  of  Representatives  desires  to  reform  its 
procedure,  to  make  its  control  over  the  purse  effective, 
to  determine  definitely  policies  from  session  to  session 
or  from  Congress  to  Congress,  to  make  possible  the 
awakening  of  the  public  to  the  widespread  effect  ex- 
travagance in  governmental  affairs  must  have  in  every 
avenue  of  industry  and  in  every  household;  if  the  Fed- 
eral Treasury  is  not  to  be  overburdened  in  the  near 
future  with  obligations  which  will  require  new,  novel 
and  vexatious  taxes,  or  the  financing  of  our  Federal 
undertakings  by  means  of  long  or  short  time  loans,  then 
it  is  imperative  that  the  methods  of  the  House  be 
changed  in  so  far  as  the  preparation  and  control  of  the 
supply  bills  are  concerned.  In  my  opinion,  based  upon 
my  experience,  study  and  service  during  the  past  14 
years,  and  by  the  information  I  have  acquired,  both 
from  those  who  have  actively  participated  in  the  events 
of  the  past  as  well  as  from  those  who  have  reviewed  and 
criticized  with  accurate  and  discriminating  judgment 
from  afar,  the  only  change  that  is  practical  and  will 
result  in  any  substantial  benefit  is  that  which  brings  all 
of  the  many  bills  under  the  control  of  one  committee. 

Later,  on  June  24,  1913,  he  devoted  a  set  speech  to 
the  advocacy  of  this  step  in  which  he  brought  forward  a 
wealth  of  citations  of  authorities  in  support  of  his  con- 
tention and  specified  the  particular  changes  in  the 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

House  rules  that  would  be  required  to  effect  the  change. 
When  the  New  York  Constitutional  Convention  was 
engaged  in  the  drafting  of  a  new  constitution  for  that 
commonwealth,  Mr.  Fitzgerald  appeared  before  its  com- 
mittee on  state  finances,  May  26,  1915,  and  gave  an 
exceedingly  illuminating  description  of  the  practical 
problem  of  voting  appropriations  in  Congress.1  In  the 
course  of  it  he  urged  upon  the  committee  the  desirability 
that  responsibility  both  for  the  formulation  of  estimates 
and  for  action  upon  them  should  be  concentrated  as  far 
as  possible. 

We  ought  to  have  some  way  in  the  system  of  our 
Government  to  fix  direct  responsibility  and  you  cannot 
fix  responsibility  if  the  power  is  too  greatly  scattered. 
We  must  concentrate  the  power  and  concentrate  the 
responsibility.  We  must  have  some  one  to  whom  the 
people  can  go.  ...  I  would  put  it  in  the  Executive.  I 
would  make  him  responsible  at  the  outset. 

Following  up  this  statement  that  responsibility  for 
the  initiating  of  expenditure  proposals  should  originate 
with  the  Executive,  he  stated  that,  while  he  thought  it 
would  be  too  radical  at  the  start  to  prohibit  to  members 
of  Congress  the  right  to  augment  or  add  to  their  pro- 
posals, this  right  should  be  radically  restricted. 

I  have  not  the  slightest  hesitation  in  saying  that  much 
better  results  would  be  obtained  if  the  individual  in  the 
two  houses  of  Congress  could  not  initiate  expenditure 
by  increasing  the  amount  proposed  by  the  Executive,  or 
proposing  expenditures  that  the  Executive  did  not  wish, 
but  I  would  not  make  that  absolutely  impossible,  but 
would  make  it  so  difficult,  and  loading  him  down,  that 

*New  York  State  Constitutional  Convention,  1915,  Document  No. 
IS- 

148 


MOVEMENT  FOR  BUDGETARY  REFORM 

it   would   only  be  done   under   the  most   peculiar   or 
extraordinary  circumstances. 

These  positions,  in  connection  with  his  strong  advo- 
cacy of  centralizing  action  upon  estimates  in  the  hands 
of  a  single  committee  on  appropriations,  show  how  con- 
vinced Mr.  Fitzgerald  is  of  the  essential  features  sought 
to  be  obtained  through  the  introduction  and  operation 
of  a  budgetary  system. 

Mr.  Sherley,  another  prominent  member  of  the  House 
Committee  on  Appropriations  and  now  its  chairman, 
though  differing  with  Mr.  Fitzgerald  in  respect  to  cer- 
tain details  of  the  action  to  be  taken,  has  ably  sup- 
ported the  latter  in  urging  the  adoption  of  essential  fea- 
tures of  a  budgetary  system.  On  February  28,  1913, 
he  devoted  a  speech  to  this  subject.  After  calling  at- 
tention to  the  fact  that  "the  United  States  is  peculiar 
among  all  of  the  great  nations  of  the  earth  in  that  it  has 
never  developed  what  might  be  called  a  budget  system 
of  government,"  and  that  under  present  conditions  each 
head  of  a  department  seeks  only  to  get  all  he  can  for  his 
particular  department  without  reference  to  the  general 
state  of  the  national  finances,  he  said: 

But  the  great  reform  to  be  made  is,  as  I  have  said,  to 
compel  consideration  by  the  Executive  and  his  Cabinet 
of  the  estimates  as  a  whole.  It  may  be  that  Congress 
will  insist  on  having  the  original  estimates  of  depart- 
mental chiefs,  though  I  do  not  believe  it  need  to,  but 
certainly,  if  possible,  the  Executive  should  be  required 
to  assume  the  responsibility  of  a  budget  proposal  and 
Congress  can  then  take  the  responsibility  of  granting, 
curtailing,  or  enlarging  such  proposal.  As  it  is  now, 
there  is  no  true  central  executive  responsibility.  Much 
of  this  reform  could  be  had  without  change  of  law  on 
the  initiative  of  the  President.  It  is  his  duty  to  advise 
Congress  from  time  to  time,  and  as  a  basis  for  such 

149 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

action  he  can  require  any  information  desired  from 
administrative  officers. 

The  latter  statement  regarding  the  power  of  the  Pres- 
ident is  undoubtedly  true.  At  the  same  time  there  are 
upon  the  statute  books  numerous  provisions  regarding 
the  manner  and  form  in  which  estimates  shall  be  sub- 
mitted which  would  have  to  be  changed  if  duplication 
of  work  is  to  be  avoided  and  if  the  executive  proposals 
are  to  go  forward  in  proper  budgetary  form. 

Pending  Proposals  in  Congress  for  Establishment  of  a 
Budget  System.  The  continued  interest  of  Congress 
in  budgetary  reform  is  shown  by  the  number  of  resolu- 
tions introduced  in  Congress  during  the  second  session 
of  the  sixty-fourth  Congress  in  1917,  calling  for  the 
establishment  of  boards  or  commissions  to  consider  the 
matter  and  to  devise  the  means  for  putting  the  admin- 
istration of  the  national  finances  upon  a  budgetary  basis. 
On  April  30,  1917,  Senator  Kenyon  of  Iowa  intro- 
duced in  the  Senate  a  joint  resolution  calling  for  the  cre- 
ation of  a  commission  "to  report  a  plan  for  the  adop- 
tion of  a  national  budget  system."  This  resolution  was 
substantially  the  same  as  a  similar  resolution  introduced 
by  him  in  191 5.1  It  provided  that  the  commission 
should  be  composed  of  the  Secretary  of  the  Treasury, 
two  other  officials  of  the  executive  government  to  be 
appointed  by  the  President,  and  three  members  of  the 
Senate  and  three  members  of  the  House  to  be  appointed 
by  the  presiding  officers  of  those  bodies;  and  that  it 
should  be  empowered  and  directed: 

To  report  at  the  opening  of  the  next  session  of  Con- 
gress a  plan  for  the  adoption  of  a  national  budget  system 
*S.  J.  Resolution  241,  Feb.  18,  1915. 

ISO 


MOVEMENT  FOR  BUDGETARY  REFORM 

for  the  government  of  the  United  States,  and  showing 
therein  what  changes,  amendments,  or  adjustments  the 
adoption  of  said  budget  system  would  cause  in  the  rules 
of  the  Senate  and  the  House,  in  the  laws  now  in  opera- 
tion relative  to  revenues  and  expenditures,  in  the  organ- 
ization of  the  Treasury  Department,  in  the  form  and 
methods  of  preparation  of  the  departmental  estimates, 
in  the  method  of  presenting  said  estimates  to  the  Con- 
gress, in  the  methods  of  accounting  and  audit  and  such 
other  and  further  information  as  said  commission  may 
see  fit  to  lay  before  the  Congress. 

Provision  was  made  for  an  appropriation  to  enable 
the  commission  to  employ  experts  and  clerical  assistance 
to  enable  it  to  carry  out  its  duties.1  The  same  resolu- 
tion was  introduced  in  the  House,  April  25,  1917,  by 
Mr.  Goodwin,  of  Arkansas. 

Mr.  Kenyon  also  sought  on  February  22,  1917,  to 
accomplish  the  same  purpose  by  having  inserted  in  the 
sundry  civil  appropriation  bill  a  clause  providing: 

That  in  order  to  further  facilitate  the  elimination  of 
waste  and  duplication  in  the  public  service  and  in  order 
that  responsibility  may  be  centered  and  expenditures 
standardized  and  made  uniform  hereafter,  a  single  com- 
mittee chosen  from  the  membership  of  the  House  of 
Representatives  shall  institute  and  prepare  all  appro- 
priation bills  in  harmony  with  a  scientific  and  modern 
budget  system. 

This  effort  he  renewed  on  May  19,  1917,  when  the 
army  and  navy  urgent  deficiencies  appropriation  bill 
was  under  consideration,  when  he  sought  to  have  incor- 
porated in  that  bill  a  section  providing  for  the  commis- 
sion called  for  by  his  resolution.  The  amendment,  how- 
ever, was  defeated  on  the  point  of  order  that  it  repre- 

1  For  a  copy  of  this  Resolution  see  Appendix  3. 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

sented  general  legislation  that  was  not  in  order  in  an 
appropriation  bill. 

Action  in  the  same  direction,  but  of  a  different  char- 
acter, was  proposed  by  Mr.  Anderson  who,  on  Febru- 
ary 1 6,  1917,  introduced  a  bill  calling  for  the  creation  of 
a  "Board  of  Administrative  Control  under  the  Direc- 
tion of  the  President  of  the  United  States,"  composed 
of  five  members  appointed  by  the  President,  whose 
powers  and  duties  were  stated  as  follows : 

It  shall  be  the  duty  of  said  board  prior  to  the  first  day 
of  December  of  each  even-numbered  year,  to  prepare 
for  submission  to  the  Congress  estimates  of  the  appro- 
priations necessary  for  the  conduct  of  the  government 
for  the  two  fiscal  years  next  ensuing.  The  Board  shall 
also  at  the  same  time  prepare  and  submit  estimates  of 
the  revenues  of  the  government  for  the  same  period. 
Such  estimates  shall  be  in  the  form  prescribed  by  the 
Board  and  shall  be  supported  by  such  supplementary 
statements  and  details  as  may  be  necessary  for  their  full 
understanding  by  the  Congress'.  The  Board  shall  also, 
with  the  approval  of  the  President,  make  such  recom- 
mendations for  the  modification,  reorganization,  or  dis- 
continuance of  existing  services,  or  the  establishment  of 
additional  services  within  the  various  branches  of  the 
government  as  may  be  necessary  or  desirable,  and  shall 
accompany  the  same  with  a  statement  of  the  reasons  for 
such  proposed  modifications,  reorganization,  or  estab- 
lishment, and  in  the  case  of  a  proposal  to  establish  a 
new  service,  with  complete  and  detailed  estimates  of  the 
expenditures  involved  therein.  The  estimates,  with  sup- 
porting statements  and  accompanying  recommendations, 
shall  be  known  as  "the  budget." 

The  President  shall,  on  the  first  Monday  of  December 
of  each  even-numbered  year,  submit  the  budget  to  the 
Congress  with  his  recommendations. 

For  the  purpose  of  making  such  estimates  and  recom- 
mendations the  Board  may  investigate  the  fiscal,  finan- 

152 


MOVEMENT  FOR  BUDGETARY  REFORM 

cial,  and  business  methods  employed  by  the  departments 
and  branches  of  the  government  and  in  all  government 
services.  The  Board  may  also  require  the  head  of  any 
department,  or  of  any  branch,  bureau,  or  office  thereof, 
to  make  such  reports  and  estimates  of  expenditures  or 
revenues  to  it  as  may  be  necessary  for  the  performance 
of  the  duties  prescribed  by  this  Act. 

That  the  Board  shall  have  general  supervision  of  the 
accounts  and  accounting  of  the  departments  and  serv- 
ices of  the  government,  and  may,  with  the  approval  of 
the  President,  prescribe  and  require  the  adoption  of 
business  methods  and  practices  and  uniform  systems  of 
accounts  and  accounting  within  and  for  said  executive 
departments  and  services. 

That  the  Board  may  also,  with  the  approval  of  the 
President,  from  time  to  time  submit  to  the  Congress 
additional  or  supplemental  estimates  to  cover  deficiencies 
or  new  services,  and  hereafter  no  estimate  shall  be  sub- 
mitted to  the  Congress  except  through  said  Board. 

This  bill  is  interesting  from  two  viewpoints :  first,  as 
providing  for  the  creation  of  a  commission  not  to  study 
and  report  upon  the  means  to  be  employed  in  establish- 
ing a  budget,  but  to  establish  one ;  and,  second,  as  con- 
taining a  recognition  of  the  fact  which  has  been  con- 
tended for  throughout  this  volume  that,  if  a  budgetary 
system  is  to  be  employed,  provision  must  be  made  for 
an  organ  to  have  charge  of  its  preparation.1 

Advocacy  of  Budget  System  by  Chamber  of  Commerce 
of  the  United  States.  The  attention  given  by  the  exec- 
utive and  legislative  branches  of  the  government  to 
budgetary  reform  has  been  paralleled  by  a  growing 
demand  on  the  part  of  the  commercial  and  industrial 
interests  of  the  country  that  the  present  unscientific 
method  of  providing  for  the  financial  needs  of  the 

1  For  a  copy  of  this  bill  in  full  see  Appendix  4. 

153 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

government  be  done  away  with.  This  class  of  the 
community  has  found  a  vigorous  spokesman  for  its 
demand  in  the  Chamber  of  Commerce  of  the  United 
States.  Again  and  again  in  its  organ  The  Nation's 
Business,  that  important  body  has  pointed  out  existing 
evils  and  urged  the  adoption  of  a  scientific  budgetary 
system  as  the  only  adequate  means  of  correcting  them. 
Thus,  in  its  issue  of  November  18,  1912,  it  gave  an 
elaborate  review  of  the  report  of  the  president's  Com- 
mission on  Economy  and  Efficiency  on  "The  Need  for 
a  National  Budget,"  and  endorsed  its  recommendations 
in  the  strongest  manner.  This  was  followed  up  by  the 
sending  out,  under  date  of  November  30,  1912,  a  call 
for  a  referendum  vote  on  the  part  of  all  its  member 
organizations  on  the  desirability  of  placing  the  admin- 
istration of  financial  affairs  of  the  national  government 
upon  a  budgetary  basis.  Following  the  plan  always  pur- 
sued by  it  in  calling  for  referenda  votes,  it  sent  with 
the  call  a  statement  of  what  the  proposition  involved 
and  the  arguments  for  and  against  the  proposal.  The 
result  of  the  vote  was  an  emphatic  approval  of  the  pro- 
ject. A  total  of  583  votes  were  cast;  of  these  573  were 
in  favor  and  but  10  in  opposition. 

With  this  strong  endorsement  of  a  national  budget, 
the  officers  of  the  Chamber  have  felt  it  their  duty  to 
use  their  best  efforts  to  secure  the  adoption  of  the  re- 
form. Prominent  place  was  given  to  the  subject  in  the 
\  issues  of  The  Nation's  Business  for  June  16,  1913, 
May  15,  1914,  and  April  15,  1915.  The  last  two  of 
these  contained  long  articles  on  the  subject  by  Harvey 
S.  Chase,  the  well-known  accountant  who  served  as  a 
member  of  the  President's  Commission  on  Economy  and 
Efficiency. 

More  recently,  at  its  fifth  annual  meeting,  1917,  the 

154 


MOVEMENT  FOR  BUDGETARY  REFORM 

organization  as  a  whole  again  placed  itself  on  record 
as  unequivocally  advocating  this  reform  by  the  adop- 
tion of  the  following  resolution: 

WHI)RE;AS,  National  expenditures  have  grown  to  a 
point  unprecedented  in  our  history,  exceeding  $1,600,- 
000,000  in  the  current  year;  and 

WH^R^AS,  New  taxation  to  produce  hundreds  of  mil- 
lions of  dollars  and  issues  of  bonds  in  large  amount  have 
become  necessary;  now,  therefore,  be  it 

Resolved,  That  the  Chamber  of  Commerce  of  the 
United  States  reaffirm  the  proposals  for  budgetary  pro- 
cedure as  adopted  by  it  in  referendum  with  almost  com- 
plete unanimity  among  the  organizations  in  its  member- 
ship,— 573  votes  to  10  votes;  and  be  it  further 

Resolved,  That  the  present  exigencies  of  national 
finance  make  it  peculiarly  necessary  in  the  public  inter- 
est that  expenditure  and  revenue  should  be  considered 
together  and  interrelated ;  and  be  it  further 

Resolved,  That  the  President  and  the  Congress  be 
asked  to  take  steps  to  inaugurate  complete  budgetary 
procedure  such  as  is  advocated  by  the  National  Chamber. 

Endorsement  of  Budget  System  in  Platform  of  Political 
Parties.  That  the  Chamber  of  Commerce  of  the 
United  States  has  correctly  interpreted  public  opinion 
in  respect  to  this  reform  is  shown  by  the  fact  that  all 
three  of  the  major  parties  in  the  Presidential  election 
of  1916  in  their  platforms  demanded  the  introduction 
by  the  national  government  of  a  budgetary  system. 
The  plank  in  the  Republican  platform  read: 

The  increasing  cost  of  the  National  Government,  and 
the  need  for  the  greatest  economy  of  its  resources,  in 
order  to  meet  the  growing  demands  of  the  people  for 
government  service,  call  for  the  severest  condemnation 
of  the  wasteful  appropriations  of  this  Democratic  Ad- 
ministration, of  its  shameless  raids  on  the  Treasury, 

155 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

and  of  its  opposition  to  and  rejection  of  President  Taft's 
oft-repeated  proposals  and  earnest  efforts  to  secure 
economy  and  efficiency  through  the  establishment  of  a 
simple,  businesslike  budget  system,  to  which  we  pledge 
our  support,  and  which  we  hold  to  be  necessary  to  effect 
a  needed  reform  in  the  administration  of  national 
finances. 

The  Democratic  plank  laid  its  chief  emphasis  upon 
the  establishment  of  a  single  committee  on  appropria- 
tions for  the  handling  of  all  appropriation  bills,  but 
stated  that  it  made  this  demand  "as  a  practicable  first 
step  toward  a  budget  system."  The  wording  of  the 
plank  was  as  follows : 

We  demand  careful  economy  in  all  expenditures  for 
the  support  of  the  Government,  and  to  that  end  favor  a 
return  by  the  House  of  Representatives  to  its  former 
practice  of  initiating  and  preparing  all  appropriation 
bills  through  a  single  committee  chosen  from  its  mem- 
bership, in  order  that  responsibility  may  be  centered,  ex- 
penditures standardized  and  made  uniform,  and  waste 
and  duplication  in  the  public  service  as  much  as  possible 
avoided.  We  favor  this  as  a  practicable  first  step 
toward  a  budget  system. 

Advocacy  of  a  Budget  System  by  President  Wilson. 

That  this  statement  of  the  Democratic  Party  in  favor 
of  action  looking  towards  the  adoption  of  a  budget  rep- 
resents also  the  matured  opinion  of  the  leader,  Presi- 
dent Wilson,  is  shown  by  the  letter  written  by  him  to 
Senator  Tillman,  January  30,  1913,  in  which  he  said: 

Ever  since  I  was  a  youngster  I  have  been  deeply  inter- 
ested in  our  methods  of  financial  legislation.  Ever  since 
then  I  have  insisted  upon  the  absolute  necessity  of  a  care- 
fully considered  and  wisely  planned  budget,  and  one  of 
the  objects  I  shall  have  most  in  mind  when  I  get  to 

156 


MOVEMENT  FOR  BUDGETARY  REFORM 

Washington  will  be  conferences  with  my  legislative  col- 
leagues there  with  a  view  to  bringing  some  budget  sys- 
tem into  existence.  This  business  of  building  up  the 
expenses  of  the  nation  piece  by  piece  will  certainly  lead 
us  to  error  and  perhaps  to  embarrassment.1 

1  Quoted  from  The  Nation's  Business,  June  16,  1913,  p.  n. 


CHAPTER  IX 

CONCLUSION:     ESTABLISHMENT    BY    CON- 
GRESS OF  A  NATIONAL  COMMISSION  ON 
THE  ADOPTION  OF  A  BUDGET  THE 
NEXT  STEP 

In  the  preceding  chapters  we  have  sought  to  do  two 
things:  to  state  the  nature  of  the  problem  of  securing 
an  efficient  administration  of  the  financial  affairs  of 
the  national  government;  and  to  suggest  certain  steps 
by  which  it  is  believed  this  end  may  in  a  measure  be 
attained. 

Emphasis  has  been  placed  upon  the  analysis  of  the 
problem,  since  substantial  progress  towards  its  solution 
cannot  be  made  until  an  accurate  knowledge  is  had  of 
the  several  factors  entering  into  it,  the  relations  that 
exist  between  these  factors  and  their  bearing  upon  all 
collateral  conditions.  If  the  present  set  of  papers  do 
nothing  else,  they  should  serve  to  make  plain  that  the 
problem  of  putting  the  system  of  financial  administra- 
tion of  the  United  States  government  upon  a  satisfac- 
tory basis  is  an  exceedingly  complex  one  and  involves 
the  taking  of  action  in  a  great  many  directions. 

A  reading  of  these  papers  will  show  that  the  writer 
is  in  thorough  sympathy  with  the  principles  underlying 
what  is  known  as  an  executive  budget.  No  greater  mis- 
take, however,  could  be  made  than  that  of  supposing 
that  all  that  is  involved  in  effecting  a  reform  of  existing 
conditions  is  the  substitution  of  an  executive  for  a  leg- 

158 


NATIONAL  COMMISSION  ON  BUDGET 

islative  budget.  In  respect  to  this,  two  things  are  to  be 
noted:  first,  that,  with  the  principle  of  an  executive 
budget  adopted,  there  still  remains  the  important  prob- 
lem of  working  out  the  practices  and  procedure  through 
which  this  principle  is  to  be  put  into  execution,  and 
which,  as  we  have  seen,  must  be  present  in  any  budget- 
ary system,  legislative  or  executive,  if  it  is  to  give  sat- 
isfactory results;  and,  second,  that  many  important  re- 
forms in  the  existing  system  may  be  put  into  effect  with- 
out Congress  definitely  adopting  that  principle.  Both 
of  these  are  matters  of  great  importance.  It  is  going 
to  be  a  matter  of  great  difficulty  to  induce  Congress  to 
adopt  in  any  whole-hearted  way  the  principle  of  an  ex- 
ecutive budget.  If  reform  is  to  wait  upon  such  action, 
material  improvement  of  existing  conditions  may  be 
indefinitely  delayed.  It  is  indeed  a  question  whether 
certain  of  the  fundamental  reforms  which  we  have  indi- 
cated as  essential  if  a  thoroughly  satisfactory  budget- 
ary system  is  to  be  established  should  not  precede  the 
adoption  of  that  policy.  Practically  all  of  the  technical 
problems  of  financial  administration — the  determina- 
tion of  the  form  and  character  of  the  budget  and  its 
supporting  documents,  to  the  end  that  they  will  furnish 
a  comprehensive  and  clear-cut  showing  of  past  opera- 
tions and  statement  of  the  financial  and  work  program 
of  the  government  for  the  future;  the  installation  of  a 
system  of  accounts  and  reports  that  will  automatically 
develop  the  data  permitting  the  statement  and  analysis 
of  those  operations  and  program  in  proper  form;  the 
establishment  of  the  administrative  machinery  required 
for  operating  this  system  and  preparing  the  budget ;  the 
improvement  of  present  methods  of  considering  and 
taking  action  upon  budgetary  proposals  by  Congress; 
and  the  development  by  the  latter  body  of  means  for 

159 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

effectively  supervising  and  controlling  the  manner  in 
which  budgetary  proposals,  when  enacted  into  law,  are 
executed — all  these  are  problems  which  must  be  met 
regardless  of  whether  the  principle  followed  is  that  of 
a  legislative  or  an  executive  determination  of  what 
funds  shall  be  raised  and  expended. 

Again,  as  we  have  pointed  out,  it  is  exceedingly  diffi- 
cult to  make  of  the  budget  a  document  that  will  fur- 
nish a  clear  picture  of  the  operations  of  government, 
past  and  proposed,  unless  the  administrative  branch  of 
the  government,  charged  with  the  conduct  of  those  oper- 
ations, is  organized  upon  some  consistent  plan  in  re- 
spect to  the  assignment  of  duties  to  particular  services 
and  the  grouping  of  these  services  departmentally.  It 
is  evident  that,  if  the  work  to  be  done  is  so  distributed 
among  the  administrative  services  that  overlapping  or 
duplication  of  work  is  avoided,  and  these  services  are 
so  grouped  departmentally  that  each  department  in- 
cludes only  services  working  in  a  distinct  field,  the  total 
expenditures  and  estimates  of  such  services  and  de- 
partments, as  they  appear  in  the  budget,  will  be  of  far 
greater  significance  than  if  these  conditions  do  not  ob- 
tain. Thus,  for  example,  the  totals  for  the  Treasury 
Department  do  not  convey  the  information  regarding 
the  cost  entailed  in  administering  the  financial  affairs 
of  the  government  that  they  would  if  there  were  ex- 
cluded from  them  the  cost  of  such  services  as  those  of 
the  Supervising  Architect,  the  Coast  Guard,  and  the 
Bureau  of  Public  Health,  which  have  no  direct  relation 
to  the  administration  of  the  financial  affairs  of  the  na- 
tion. 

The  allotment  of  duties  and  the  grouping  of  services 
departmentally  that  now  obtains  has  not  been  effected 
as  the  result  of  any  carefully  worked  out  plan  but  has 

160 


NATIONAL  COMMISSION  ON  BUDGET 

been  built  up  piecemeal.  A  situation  is  thus  presented 
where  it  is  highly  desirable  that  a  thorough-going  ex- 
amination should  be  made  of  the  whole  field  of  govern- 
mental activities  with  a  view  to  determining  what  steps 
should  be  taken  toward  putting  the  organization  of  this 
branch  upon  a  more  satisfactory  basis.  If  this  could  be 
accomplished,  not  only  would  the  whole  administrative 
branch  of  the  government  be  put  upon  a  more  econom- 
ical and  efficient  basis,  but  the  foundation  would  be 
laid  for  the  formulation  of  a  budget  that  would  furnish 
information  regarding  the  cost  of  organization  units 
which  it  is  difficult  to  secure  under  existing  conditions. 
A  feature  that  such  an  examination  would  in  all  cer- 
tainty bring  out  is  the  need  that  exists  for  what  may 
be  termed  a  general  bureau  of  administration  for  the 
government  as  a  whole.  When  the  duties  of  the  gov- 
ernment were  comparatively  few  and  related  almost 
wholly  to  what  may  be  termed  the  primary  or  essential 
functions  of  government,  the  need  for  such  a  service 
was  scarcely  felt.  Now  the  government  is  a  huge  cor- 
poration carrying  on  operations  of  a  range  that  em- 
braces almost  all  fields  of  activity.  It  has  become  a 
matter  of  great  difficulty  for  any  officer  of  the  govern- 
ment, even  the  President  himself,  to  know  what  the 
government  is  doing,  or  in  what  service  particular  ac- 
tivities are  being  performed.  The  services  and  depart- 
ments are  now  compelled  to  perform  their  work  in  more 
or  less  ignorance  of  what  their  sister  services  and  de- 
partments are  doing.  The  result  is  that  there  exists 
widespread  duplication  of  work,  or  at  least  failure  on 
the  part  of  one  service  fully  to  avail  itself  of  the  re- 
sources or  work  of  other  services.  It  is  a  matter  of 
almost  daily  occurrence  for  one  service  laboriously  to 
compile  data  needed  by  it,  in  ignorance  of  the  fact  that 

161 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

such  data  has  already  been  secured  by  some  other  serv- 
ice and  could  be  secured  immediately  upon  request. 

There  is  but  one  way  through  which  this  condition 
of  affairs  can  be  avoided,  namely,  through  the  creation 
of  a  central  bureau  of  administration  whose  duty  it  shall 
be,  acting  as  the  agent  of  the  President,  to  keep  in  touch 
with  all  the  operations  of  the  administrative  services 
and  serve  as  the  clearing  house  and  means  through 
which  the  operations  of  these  services  may  be  effectively 
correlated.  Such  an  organ  would  also  furnish  the 
agency  through  which  standardization  of  organization, 
personnel,  equipment  and  procedure  could  be  effected. 
It  would  also  furnish  the  organ  which,  as  we  have  seen, 
must  be  provided  for  attending  to  the  work  involved  in 
securing  and  assembling  the  departmental  estimates,  in 
analyzing  them,  and  throwing  them  into  the  form  of  a 
budget  for  submission  to  Congress. 

The  need  for  such  an  organ  was  at  once  apparent  as 
the  danger  of  our  being  drawn  into  the  great  European' 
conflict  became  acute.  Realization  of  this  need  led  to 
the  creation  of  the  Council  of  National  Defense.  Valu- 
able as  has  been  the  work  of  this  body  in  certain  direc- 
tions, it  has  largely  failed  to  meet  expectations  in  re- 
spect to  the  correlating  of  the  activities  of  the  govern- 
ment. This  has  been  due  to  the  fact  that  it  has  had 
neither  definite  status,  powers,  and  organization,  nor 
the  means  of  keeping  in  touch  with  the  other  govern- 
mental activities  whose  assistance  it  needs.  The  estab- 
lishment of  this  body  has,  however,  made  known  the 
definite  need  for  a  centralizing  and  correlating  organ 
with  jurisdiction  extending  over  all  the  administrative 
services  and  furnishing  the  means  through  which  the 
President  may  effectively  discharge  his  duties  as  admin- 
istrator in  chief  of  the  nation. 

162 


NATIONAL  COMMISSION  ON  BUDGET 

This  subject  of  the  need  for  a  service  of  this  charac- 
ter is  one  presenting  many  phases  and  the  author  hopes 
to  make  it  the  subject  of  a  special  discussion  early  in 
the  future.  It  is  mentioned  here  only  because  of  its 
intimate  relation  to  the  problem  of  providing  the  means 
through  which  a  budgetary  system  may  be  effectively 
operated,  and  as  furnishing  an  additional  illustration 
of  the  need  that  exists  for  taking  the  action  which  it  is 
the  purpose  of  this  concluding  chapter  to  urge. 

This  action  consists  in  the  establishment  by  Congress 
of  a  national  commission  on  budgetary  and  administra- 
tive reform,  having  for  its  purpose  the  making  of  a  de- 
tailed examination  of  the  whole  problem  of  putting  the 
administration  of  our  national  finances  and  the  organi- 
zation of  the  administrative  branch  of  the  government 
upon  a  more  satisfactory  basis.  In  making  such  an  ex- 
amination this  commission  should  be  specially  charged 
with  the  task  of  investigating  and  reporting  upon  the 
steps  to  be  taken  looking  to  the  introduction  of  a  budget 
as  the  central  or  foundation  stone  of  the  whole  system 
of  financial  administration.  Preferably,  this  commis- 
sion should  be  composed  of  the  President  and  members 
representing  each  of  the  two  houses  of  Congress.  It 
is  desirable  that  both  the  legislative  and  executive 
branches  of  government  should  be  represented,  as  the 
problems  to  be  considered  concern  both,  and  the  rec- 
ommendations to  be  made  should,  if  possible,  be  ones 
that  will  meet  with  the  approval  of  both.  It  would  be 
well  if  the  resolution  creating  the  commission  were  to 
provide  that  the  chairman  of  the  Committees  on  Ap- 
propriations and  Ways  and  Means  of  the  House  and  of 
Appropriations  and  Finance  of  the  Senate  be  ex-officio 
members  of  the  commission.  This  is  desirable,  not  only 
in  order  that  the  commission  may  have  the  services  of 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

these  members  of  the  two  houses  who  arp  intimately 
familiar  with  the  problems  of  financial  administration, 
but  in  order  that  the  conclusions  reached  should  be  such 
as  commend  themselves  to  these  officials  to  whom  the 
two  houses  properly  look  for  advice  in  respect  to  finan- 
cial matters.  Manifestly,  proposals  for  reform  origi- 
nating with  them  would  stand  a  far  greater  chance  of 
adoption  than  if  their  support  had  to  be  subsequently 
obtained.  In  like  manner  it  is  desirable  that  the  Treas- 
ury Department  should  be  represented  by  an  assistant 
secretary  or  other  official  of  high  rank.  Provision 
finally  should  be  made  for  the  employment  by  the  com- 
mission of  such  a  staff  of  technical  experts  as  may  be 
required  by  it  for  the  efficient  prosecution  of  its  work. 
It  is  especially  to  be  emphasized  that  the  body  making 
the  investigation  and  report  here  proposed  should  de- 
rive its  power  from  Congress  and  be  required  to  make 
its  report  directly  to  that  body.  Congress  is  the  body 
having  the  responsibility  for  determining  what  the  gov- 
ernment shall  do,  how  it  shall  be  financed,  what  shall  be 
its  organization,  and  what  the  methods  of  procedure. 
It  may  delegate  this  work  in  part,  but  it  cannot  relieve 
itself  of  its  final  responsibility.  If  the  problems  repre- 
sented were  ones  merely  of  perfecting  details  of  admin- 
istrative organization  and  procedure,  their  solution 
might  safely  be  left  to  a  body  created  by  and  working 
under  the  direction  of  the  Executive.  What  is  here  pro- 
posed as  the  only  means  of  effecting  reforms  that  will 
be  really  worth  while  is  that  the  whole  problem  of 
making  provision  for  the  administration  of  the  financial 
affairs  of  the  government  shall  be  subjected  to  exam- 
ination with  a  view  to  the  possible  adoption  of  a  sys- 
tem differing  fundamentally  from  the  one  now  in  force, 
and  that,  collaterally  with  this,  the  whole  administra- 

164 


NATIONAL  COMMISSION  ON  BUDGET 

live  branch  of  the  government  be  put  upon  the  operat- 
ing table,  as  it  were,  for  the  purpose  of  determining 
what  changes  should  be  made  in  its  structural  character 
in  order  that  a  better  distribution  of  work  and  correla- 
tion and  grouping  of  services  may  be  secured.  Changes 
of  such  magnitude  and  importance  can  be  effected  only 
by  and  with  the  full  concurrence  of  Congress.  The 
preparatory  work  leading  up  to  it  should,  therefore,  be 
done  by  its  agent  and  under  its  current  direction  and 
control. 

To  attempt  to  enumerate  the  several  subjects  that 
should  be  examined  into  by  such  a  commission  would 
involve  a  repetition  of  much  that  has  been  said  in  the 
preceding  pages.  It  is  to  be  emphasized,  however,  that 
though  its  primary  task  should  be  that  of  considering 
the  extent  to  which  the  principle  of  an  executive  budget 
can  be  applied  to  our  form  of  government,  its  useful- 
ness will  not  be  wholly  dependent  upon  the  adoption  of 
that  principle,  for  a  real  budgetary  system  can  be  es- 
tablished even  though  Congress  may  decide  to  retain 
substantially  the  power  over  appropriations  that  it  now 
exercises;  and  many  other  administrative  reforms  of  a 
wide-reaching  character  can  be  accomplished,  provided 
the  commission  is  given  the  duty  and  takes  as  its  task 
the  examination  of  the  fundamental  problems  involved 
in  securing  an  efficient  conduct  of  the.  financial  and  ad- 
ministrative affairs  of  the  government,  rather  than  in- 
quiring what  minor  changes  can  be  made  in  a  system 
which  is  fundamentally  defective. 


APPENDICES 


APPENDIX  I 

FINANCIAL  STATEMENTS  OF  THE  INSTITUTE  FOR 
GOVERNMENT  RESEARCH 

As  Illustrating  the  Character  and  Form  of  Presentation  of 
Expenditure  Data  it  is  Desirable  to  have  Regarding 
Government  Services  for  General  Adminis- 
trative and  Budgetary  Purposes 

It  has  been  pointed  out  that,  for  both  general  administrative 
and  budgetary  purposes,  it  is  desirable  that  the  accounts  of 
the  several  services  of  the  government  shall  be  so  kept  and 
their  reports  so  rendered  as  to  permit  of  an  analysis  of  their 
total  expenditures  classified  from  the  five  standpoints  of :  ( I ) 
funds,  (2)  character  of  expenditures,  (3)  organization  units, 
(4)  activities,  and  (5)  objects  of  expenditure.  The  Institute 
for  Government  Research  from  the  standpoint  of  administra- 
tion and  budgetary  control  has  a  status  strictly  analogous  to 
that  of  a  government  service.  It  is  an  administrative  organiza- 
tion that  is  financed  by,  and  subject  to,  the  superior  direction, 
supervision  and  control  of  a  board  of  trustees  in  the  same 
way  that  a  government  service  is  financed  by,  and  subject  to, 
the  superior  direction,  supervision  and  control  of  Congress. 
There  exists  in  its  case,  therefore,  the  same  need  as  exists  in 
the  case  of  government  services,  that  its  accounts  shall  be  so 
kept  and  its  reports  so  rendered  as  to  permit  of  its  financial 
operations  being  studied  from  each  of  the  five  viewpoints  that 
have  been  enumerated. 

Due  to  an  appreciation  of  this  fact,  the  accounting  and 
reporting  system  of  the  Institute  has  been  organized  and  con- 
ducted strictly  in  accordance  with  the  principles  which  have 

169 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

been  laid  down  in  the  chapter  on  "The  Nature  and  Functions 
of  a  Budget."  It  was  felt  that  by  so  doing  not  only  would 
the  Board  of  Trustees  and  the  Director  receive  that  informa- 
tion which  they  must  have  if  they  are  effectively  to  perform 
their  respective  duties,  but  that  a  concrete  illustration  would 
be  furnished  of  a  system  in  practical  operation  giving  the  data 
needed  for  administrative  and  budgetary  purposes. 

The  tables  that  follow  show  the  operations  of  the  Institute 
since  it  began  active  operations  on  October  i,  1916.  They  are 
in  the  form  in  which  they  were  prepared  monthly  and  sub- 
mitted to  the  Director  and  to  the  executive  committee  of  the 
Board  of  Trustees.  The  annual  report  of  the  Director  con- 
tains in  addition  a  balance  sheet  and  other  supporting  docu- 
ments. Examination  of  these  tables  shows  how  complete  a 
presentation  is  made  of  the  financial  operations  of  the  Insti- 
tute from  whatever  standpoint  it  may  be  desired  to  subject 
them  to  study,  and  how  fully  they  give  to  the  Board  of  Trus- 
tees the  data  that  it  needs  in  order  intelligently  to  formulate 
a  financial  and  work  program  for  the  future.  Of  special 
interest  is  the  table  giving  expenditures  classified  by  activities. 
It  shows  at  a  glance  precisely  what  was  done  with  all  the 
money  expended.  It  will  be  noted  that  in  this  table  a  clear 
distinction  is  made  between  expenditures  required  for  the 
maintenance  and  operation  of  the  Institute  as  an  institution, 
and  those  made  for  the  performance  of  its  functional  or  spe- 
cific activities. 

It  is  hardly  necessary  to  point  out  how  much  the  work  of 
Congress  in  determining  what  appropriations  shall  be  made 
for  the  several  services  of  the  government  would  be  facilitated, 
if  it  were  to  receive  corresponding  data  regarding  all  the  serv- 
ices of  the  government  that  it  has  to  finance.  It  is  recognized 
that  the  Institute,  in  comparison  with  many  services  of  the 
government,  is  a  small  establishment.  There  is,  however,  no 
reason  why  the  principles  it  employs  should  not  find  expres- 
sion in  other  services  regardless  of  their  size.  If  the  point 
should  be  raised  that  the  keeping  of  accounts  in  such  a  way 

170 


INSTITUTE  FOR  GOVERNMENT  RESEARCH 

as  to  furnish  this  information  would  involve  the  maintenance 
of  a  very  complicated  system  of  accounts  and  entail  a  large 
expenditure  of  money,  the  answer  can  be  made  that  this  has 
not  been  the  experience  of  the  Institute.  Reference  to  the 
table  showing  expenditures  classified  according  to  activities 
shows  that  the  cost  of  performing  all  the  work  involved  in 
the  keeping  of  accounts  and  the  rendering  of  reports  has  never 
equalled  the  sum  of  thirty-five  dollars  per  month.  The  per- 
formance of  this  work,  it  may  be  stated,  has  been  much  fa- 
cilitated by  the  care  that  was  taken  to  describe,  in  the  form 
of  a  Manual  of  Accounting,  all  the  steps  involved  in  admin- 
istering the  financial  affairs  of  the  Institute  from  the  first  step, 
such  as  the  preparation  of  requisitions,  or  purchase  orders, 
to  the  final  settlement  and  payment  of  claims  and  the  prepara- 
tion of  the  monthly  and  annual  financial  statements. 


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179 


APPENDIX   2 

MESSAGE  OF  PRESIDENT  TAFT  TO   CONGRESS 

ON 

THE  NEED  FOR  A  NATIONAL  BUDGET 
JUNE  27,    1912 

To  the  Senate  and  House  of  Representatives: 

I  send  herewith  the  report  of  the  Commission  on  Economy 
and  Efficiency  on  "The  Need  for  a  National  Budget."  The 
recommendations  contained  therein  are  approved  by  me.  I 
recommend  to  the  Congress  the  enactment  of  the  legislation 
necessary  to  put  them  into  effect. 

The  subject  is  one  of  fundamental  importance  to  the  Execu- 
tive, as  well  as  to  the  Congress.  Notwithstanding  the  magni- 
tude and  complexity  of  the  business  which  is  each  year  con- 
ducted by  the  executive  branch  and  financed  by  the  Congress, 
and  the  vital  relation  which  each  governmental  activity  bears 
to  the  welfare  of  the  people,  there  is  at  present  no  provision 
for  reporting  revenues,  expenditures,  and  estimates  for  ap- 
propriations in  such  manner  that  the  Executive,  before  sub- 
mitting estimates,  and  each  Member  of  Congress,  and  the  peo- 
ple, after  estimates  have  been  submitted,  may  know  what  has 
been  done  by  the  Government  or  what  the  Government  pro- 
poses to  do. 

Briefly  stated,  the  situation  is  this :  Under  the  Constitution 
(and  subject  to  its  limitations)  the  Congress  is  made  re- 
sponsible for  determining  the  following  questions  of  policy: 
What  business  or  work  the  Government  shall  undertake ;  what 
shall  be  the  organization  under  the  Executive  which  is  charged 
with  executing  its  policies;  what  amount  of  funds,  and  by 
what  means  funds  shall  be  provided  for  each  activity  or  class 

180 


MESSAGE  OF  PRESIDENT  TAFT 

of  work;  what  shall  be  the  character  of  expenditures  author- 
ized for  carrying  on  each  class  of  work — i.  e.,  how  much  for 
expenses,  how  much  for  capital  outlays,  etc. 

As  a  means  of  definitely  locating  this  responsibility  the  Con- 
gress was  given  the  sole  power  to  levy  taxes ;  to  borrow  money 
on  the  credit  of  the  United  States;  to  authorize  money  to  be 
drawn  from  the  Treasury.  To  the  President  also  has  been 
given  very  definite  responsibility.  To  the  end  that  the  Con- 
gress may  effectively  discharge  its  duties  the  article  of  the 
Constitution  dealing  with  legislative  power  provides  that  "a 
regular  statement  and  account  of  receipts  and  expenditures  of 
all  public  moneys  shall  be  published,"  and  the  article  dealing 
with  the  Executive  power  requires  the  President  "from  time 
to  time  to  give  to  the  Congress  information  on  the  state  of 
the  Union  and  to  recommend  to  their  consideration  such  meas- 
ures as  he  shall  deem  necessary  and  expedient." 

Notwithstanding  these  specific  constitutional  requirements 
there  has  been  relatively  little  attention  given  to  the  working 
out  of  an  adequate  and  systematic  plan  for  considering  ex- 
penditures and  estimates  for  appropriations;  for  regularly 
stating  these  in  such  form  that  they  may  be  considered  in 
relation  to  questions  of  public  policy;  and  for  presenting  to 
the  Congress  for  their  consideration  each  year,  when  requests 
are  made  for  funds,  any  definite  plan  or  proposal  for  which 
the  administration  may  be  held  responsible. 

Regular  committees  on  expenditure  have  been  established  by 
the  Congress  for  the  purpose  of  obtaining  knowledge  of  con- 
ditions through  special  investigations.  During  the  last  cen- 
tury over  100  special  congressional  investigations  have  been 
authorized  to  obtain  information  which  should  have  been 
regularly  submitted,  and  much  money  as  well  as  much  time 
has  been  spent  by  the  Congress  in  its  effort  to  obtain  infor- 
mation about  matters  that  should  be  laid  before  them  as  an* 
open  book;  many  statutes  have  been  passed  governing  the 
manner  in  which  reports  of  expenditures  shall  be  made;  spe- 
cific rules  have  been  laid  down  giving  the  manner  in  which 

181 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

estimates  shall  be  submitted  to  the  Congress  and  considered 
by  it.  From  time  to  time  special  investigations  have  been 
made  by  heads  of  executive  departments.  During  the  last 
century  many  such  investigations  have  been  carried  on  and 
much  money  has  been  spent  in  the  conduct  of  these,  as  well 
as  by  the  Congress  for  the  purpose  of  obtaining  facts  as  a 
basis  for  intelligent  consideration  of  methods  and  procedure 
of  doing  business  with  a  view  to  increasing  economy  and  effi- 
ciency. From  time  to  time  Executive  orders  have  been  is- 
sued and  reorganizations  have  taken  place. 

Generally  speaking,  however,  the  only  conclusions  which 
may  be  reached  from  all  of  this  are  that — 

No  regular  or  systematic  means  has  been  provided  for  the 
consideration  of  the  detail  and  concrete  problems  of  the  Gov- 
ernment. 

A  well-defined  business  or  work  program  for  the  Govern- 
ment has  not  been  evolved. 

The  reports  of  expenditures  required  by  law  are  unsys- 
tematic, lack  uniformity  of  classification,  and  are  incapable 
of  being  summarized  so  as  to  give  to  the  Congress,  to  the 
President,  or  to  the  people  a  picture  of  what  has  been  done, 
and  of  cost  in  terms  either  of  economy  of  purchase  or  effi- 
ciency of  organization  in  obtaining  results. 

The  summaries  of  expenditures  required  by  law  to  be  sub- 
mitted by  the  Secretary  of  the  Treasury,  with  estimates,  not 
only  do  not  provide  the  data  necessary  to  the  consideration  of 
questions  of  policy,  but  they  are  not  summarized  and  clas- 
sified on  the  same  basis  as  the  estimates. 

The  report  on  revenues  is  not  in  any  direct  way  related 
to  the  expenditures,  except  as  the  Secrtary  of  the  Treasury 
estimates  a  surplus  or  a  deficiency  and  this  estimate  is  based 
on  accounts  which  do  not  accurately  show  expenditures  or  out- 
standing liabilities  to  be  met. 

Instead  of  the  President  being  made  responsible  for  esti- 
mates of  expenditures,  the  heads  of  departments  and  estab- 
lishments are  made  the  ministerial  agents  of  the  Congress, 

183 


MESSAGE  OF  PRESIDENT  TAFT 

the  President  being  called  on  only  to  advise  the  Congress  how, 
in  his  opinion,  expenditures  may  be  reduced  or  revenues  may 
be  increased  in  case  estimated  expenditures  exceed  estimated 
revenues. 

The  estimates  do  not  raise  for  consideration  questions  which 
should  be  decided  before  appropriations  are  granted,  nor 
does  the  form  in  which  estimates  are  required  by  the  Con- 
gress to  be  presented  lay  the  foundation  for  the  consideration 
of:  Subjects  of  work  to  be  done;  the  character  of  organiza- 
tion best  adapted  to  performing  work;  the  character  of  ex- 
penditures to  be  made;  the  best  method  of  financing  expen- 
ditures. 

The  present  law  governing  the  preparation  and  submis- 
sion of  estimates,  requiring  them  to  be  submitted  each  year 
in  the  same  form  as  the  year  before,  was  passed  without  due 
consideration  as  to  what  information  should  be  laid  before 
the  Congress  as  a  basis  for  action,  the  result  being  that  the 
unsystematic  and  confused  method  before  in  use  was  made 
continuous. 

The  rules  of  the  Congress  do  not  provide  for  the  con- 
sideration of  estimates  in  such  manner  that  any  Member  of 
Congress,  any  committee,  or  either  House  of  Congress  as  a. 
whole  may  have  at  any  one  time  the  information  needed  for 
the  effective  consideration  of  a  program  of  work  done  or  to 
be  done. 

The  committee  organization  is  largely  the  result  of  historical 
development  rather  than  of  the  consideration  of  present 
needs. 

Inadequate  provision  is  made  for  getting  before  each  com- 
mittee to  which  appropriations  are  referred  all  of  the  data 
necessary  for  the  consideration  of  work  to  be  done,  organiza- 
tion provided  for  doing  work,  character  of  expenditures,  or 
method  of  financing. 

Following  the  method  at  present  prescribed,  the  estimates 
submitted  by  each  organization  unit  may  have  to  be  split  up  for 
consideration  by  appropriation  committees  of  the  Congress 

183 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

and  be  made  the  subject  of  several  different  bills;  in  few 
places  are  all  of  the  estimates  or  appropriations  asked  for  by 
a  single  organization  unit  brought  together. 

The  estimates  for  appropriations  requested  for  a  single  class 
of  work  are  similarly  divided,  no  provision  being  made  for 
considering  the  amount  asked  for,  the  amount  appropriated, 
or  the  amount  spent  for  a  single  general  class  of  governmental 
activity. 

Generally  speaking,  the  estimates  for  expenses  (or  cost  of 
each  definite  class  of  services  to  be  rendered)  are  not  sep- 
arately shown  from  estimates  for  capital  outlays  (or  cost 
of  land,  buildings,  equipment,  and  other  properties  acquired). 

While  the  classification  and  summaries  of  estimates  do  indi- 
cate a  proposed  method  of  financing,  these  summaries  do  not 
show  classes  of  work  or  the  character  of  expenditures  pro- 
vided for  and  therefore  cannot  lay  the  foundation  for  the 
consideration  of  methods  of  financing  as  a  matter  of  govern- 
mental policy,  as  is  contemplated  under  the  Constitution. 

The  appropriations  are  just  as  unsystematic  and  incapable 
of  classification  and  summary  as  the  estimates — in  fact,  fol- 
low the  same  general  form,  making  it  difficult  and  in  many 
cases  impossible  to  determine  what  class  of  work  has  been 
authorized,  how  much  may  be  spent  for  each  class,  or  the 
character  of  expenditures  to  be  made;  nor  does  any  one  bill 
cover  the  total  authorizations  for  any  particular  general  class 
of  work. 

Bills  for  appropriations  (the  authorizations  to  incur  liabili- 
ties and  to  spend)  are  not  considered  by  the  committee  to  which 
measures  for  raising  revenues  and  borrowing  money  are  re- 
ferred, nor  are  revenues  and  borrowings  considered  by  com- 
mittees on  appropriations  in  relation  to  the  funds  which  will  be 
available. 

So  long  as  the  method  at  present  prescribed  obtains,  neither 
the  Congress  nor  the  country  can  have  laid  before  it  a  definite 
understandable  program  of  business,  or  of  governmental  work 
to  be  financed;  nor  can  it  have  a  well-defined,  clearly  ex- 

184 


MESSAGE  OF  PRESIDENT  TAFT 

pressed  financial  program  to  be  followed;  nor  can  either  the 
Congress  or  the  Executive  get  before  the  country  the  pro- 
posals of  each  in  such  manner  as  to  locate  responsibility  for 
plans  submitted  or  for  results. 

Although  the  President  has  the  power  to  install  new  and 
improved  systems  of  accounts  and  to  require  that  informa- 
tion be  presented  to  him  each  year  in  such  form  that  he  and 
his  Cabinet  may  intelligently  consider  proposals  or  estimates; 
although  the  President,  under  the  Constitution,  may  submit 
to  the  Congress  each  year  a  definite  well-considered  budget, 
with  a  message  calling  attention  to  subjects  of  immediate 
importance,  to  do  this  without  the  cooperation  of  the  Con- 
gress in  the  repeal  of  laws  which  would  be  conflicting  and 
in  the  enactment  of  other  laws  which  would  place  upon  the 
heads  of  departments  duties  to  be  performed  that  would  be  in 
harmony  with  such  procedure,  would  entail  a  large  expendi- 
ture of  public  money  in  duplication  of  work. 

The  purpose  of  the  report  which  is  submitted  is  to  suggest 
a  method  whereby  the  President,  as  the  constitutional  head  of 
the  administration,  may  lay  before  the  Congress,  and  the 
Congress  may  consider  and  act  on,  a  definite  business  and 
financial  program;  to  have  the  expenditures,  appropriations, 
and  estimates  so  classified  and  summarized  that  their  broad 
significance  may  be  readily  understood ;  to  provide  each  Mem- 
ber of  Congress,  as  well  as  each  citizen  who  is  interested, 
with  such  data  pertaining  to  each  subject  of  interest  that  it 
may  be  considered  in  relation  to  each  question  of  policy  which 
should  be  gone  into  before  an  appropriation  for  expenditures 
is  made;  to  have  these  general  summaries  supported  by  such 
detail  information  as  is  necessary  to  consider  the  economy 
and  efficiency  with  which  business  has  been  transacted;  in 
short,  to  suggest  a  plan  whereby  the  President  and  the  Con- 
gress may  cooperate — the  one  in  laying  before  the  Congress 
and  the  country  a  clearly  expressed  administrative  program 
to  be  acted  on;  the  other  in  laying  before  the  President  a 
definite  enactment  to  be  acted  on  by  him. 

185 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

Included  in  this  report  are  summaries  of  expenditures  for 
the  year  1911,  summaries  of  appropriations  for  the  fiscal  year 
1912,  and  summaries  of  estimates  of  appropriations  for  the 
fiscal  year  1913.  To  these  summaries  your  special  attention 
is  invited.  Attached  is  also  an  appendix  containing  a  digest 
of  laws  pertaining  to  appropriations  and  allotments,  to  the 
preparation  of  estimates,  and  to  forms  of  reporting  expen- 
ditures ;  also  the  suggested  pro  forma  draft  of  budget,  which 
has  been  prepared  by  the  commission  and  is  submitted  for 
your  consideration  as  a  matter  bearing  very  directly  on  the 
economy  and  efficiency  with  which  Government  business  is 
carried  on. 

WM.  H.  TAFT. 

THE  WHITE  HOUSE,  June  27,  1912. 


APPENDIX   3 

RESOLUTION  CREATING  A  COMMISSION  TO  REPORT  A  PLAN 

FOR  THE  ADOPTION  OF  A  NATIONAL  BUDGET  SYSTEM 

SENATE  JOINT  RESOLUTION,  46,   56TH   CONGRESS,    1ST  SESSION 

INTRODUCED  BY  MR.  KENYON,  APRIL  30,  IQI? 

Whereas  in  times  of  peace  the  expenditures  of  the  Gov- 
ernment were  increasing  yearly  at  a  rapid  rate;  and 

Whereas  our  entry  into  the  world  war  will  enlarge  these 
expenditures  to  enormous  proportions;  and 

Whereas  the  increased  taxation  to  support  the  Government 
will  place  new  burdens  upon  the  shoulders  of  every  citizen 
of  the  United  States;  and 

Whereas  this  vast  sum  of  money  should  be  spent  with  the 
utmost  efficiency  and  economy,  and  under  modern  methods 
of  control;  and 

Whereas  the  estimates  for  the  expenditures  of  the  Govern- 
ment come  to  Congress  without  revision  or  scrutiny  by  any 
centralized  agency  of  the  Executive  Government  and  are  not 
treated  by  Congress  as  a  part  of  its  legislative  program;  and 

Whereas  under  our  present  methods  of  legislative  procedure 
the  responsibility  for  the  expenditures  of  the  Government  is 
scattered  amongst  a  number  of  standing  committees  in  the 
two  Houses  of  Congress,  which  work  independently  of  each 
other  and  of  the  Executive  Government  in  providing  funds; 
and 

Whereas  it  is  possible  for  private  Members  on  the  floors 
of  the  two  Houses  to  offer  amendments  at  will  increasing  the 
items  of  expenditure  provided  in  the  respective  appropriation 
bills  beyond  the  amounts  requested  by  the  executive;  and 

Whereas  under  this  procedure  the  evil  practices,  known  as 

187 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

"log-rolling"  and  "pork-barrel"  methods,  have  grown  up  and 
flourished;  and 

Whereas  under  this  system  there  is  no  possibility  of  a 
governmental  business  program,  or  of  a  financial  policy,  or 
of  a  coordination  of  expenditures  with  revenues;  and 

Whereas  it  is  the  consensus  of  opinion  among  men  of  busi- 
ness, publicists,  and  students  of  public  finance  that  the  adop- 
tion of  the  national  budget  system  would  put  the  finances, 
of  the  Government  upon  a  sound,  efficient,  and  economical 
basis  by  making  possible  a  business  program  prepared  upon 
the  responsibility  of  the  executive  and  presented  by  him  to 
Congress  to  be  enacted  into  law;  and 

Whereas  the  chief  political  parties  of  the  country  in  their 
platforms  in  nineteen  hundred  and  sixteen  pledged  themselves 
to  carry  out  budgetary  reforms  for  the  Federal  Government; 
and 

Whereas  it  is  the  experience  of  practically  all  foreign  gov- 
ernments that  the  national  budget  system  is  the  only  efficient 
method  of  dealing  with  the  expenditures  and  revenues;  and 

Whereas  to  plan  such  a  system  for  this  Government  requires 
careful  study :  Therefore  be  it 

Resolved  by  the  Senate  and  House  of  Representatives 
of  the  United  States  of  America  in  Congress  assembled, 
That  a  joint  commission  to  report  out  a  plan  for  adoption 
of  a  national  budget  system  is  hereby  established.  Its  mem- 
bership shall  consist  of  the  Secretary  of  the  Treasury  and 
two  other  officials  of  the  Executive  Government,  to  be  ap- 
pointed by  the  President;  three  Members  of  the  Senate  and 
three  Members  of  the  House,  to  be  appointed  by  the  presid- 
ing officer  of  the  House  and  Senate,  respectively. 

SEC.  2.  That  no  compensation  shall  be  paid  to  any 
member  of  said  commission. 

SEC.  3.  That  said  commission  is  hereby  empowered 
and  directed  to  report  at  the  opening  of  the  next  session  of 
Congress  a  plan  for  the  adoption  of  a  national  budget  sys- 
tem for  the  Government  of  the  United  States,  and  showing 

1 88 


RESOLUTION  FOR  NATIONAL  BUDGET  SYSTEM 

therein  what  changes,  amendments,  or  adjustments  the 
adoption  of  said  budget  system  would  cause  in  the  rules  of 
the  Senate  and  the  House  in  the  laws  now  in  operation 
relative  to  revenues  and  expenditures,  in  the  organization 
of  the  Treasury  Department,  in  the  forms  and  method  of 
preparation  of  the  departmental  estimates,  in  the  method 
of  presenting  said  estimates  to  the  Congress,  in  the  methods 
of  accounting  and  audit,  and  such  other  and  further  infor- 
mation as  said  commission  may  see  fit  to  lay  before  the 
Congress. 

SEC.  5.  That  said  commission  is  authorized  to  employ 
such  experts  and  such  clerical  assistance  as  may  be  neces- 
sary to  carry  out  the  provisions  of  this  resolution. 

SEC.  6.  That  the  sum  of  $25,000,  or  so  much  thereof 
as  may  be  necessary,  is  hereby  appropriated  out  of  any 
money  in  the  Treasury  not  otherwise  appropriated,  to  carry 
out  the  provisions  of  this  resolution. 

SEC.  7.  That  said  commission  shall  expire  on  the  thirty- 
first  day  of  December,  nineteen  hundred  and  seventeen. 


APPENDIX   4 

A  BILL  TO  PROVIDE  A  BOARD  OF  ADMINISTRATIVE  CONTROL 
UNDER  THE  DIRECTION  OF  THE  PRESIDENT 
OF   THE   UNITED   STATES 

H.  R.  2O94I,  64TH  CONGRESS,  2D  SESSION 
INTRODUCED  BY  MR.  ANDERSON,  FEBRUARY  1 6,  1 917 

Be  it  enacted  by  the  Senate  and  House  of  Representa- 
tives of  the  United  States  of  America  in  Congress  assem- 
bled. That  a  board  is  hereby  created  to  be  under  the  imme- 
diate direction  and  control  of  the  President  of  the  United 
States,  to  be  known  as  the  Board  of  Administrative  Con- 
trol (hereinafter  in  this  Act  referred  to  as  the  board), 
which  shall  be  composed  of  five  members,  who  shall  be  ap- 
pointed by  the  President.  The  first  members  appointed 
shall  continue  in  office  for  terms  of  one,  two,  three,  four, 
and  five  years,  respectively,  from  the  date  of  the  passage 
of  this  Act,  the  term  of  each  to  be  designated  by  the  Presi- 
dent; but  their  successors  shall  be  appointed  for  terms  of 
five  years,  except  that  any  person  chosen  to  fill  a  vacancy 
shall  be  appointed  only  for  the  unexpired  term  of  the  mem- 
ber whom  he  shall  succeed.  The  President  shall  designate 
annually  the  chairman  and  vice  chairman  of  the  board.  No 
member  shall  engage  actively  in  any  other  business,  func- 
tion, or  employment.  Any  member  may  be  removed  by 
the  President  for  inefficiency,  neglect  of  duty,  or  malfeas- 
ance in  office.  A  vacancy  shall  not  impair  the  right  of  the 
remaining  members  to  exercise  all  the  powers  of  the  board. 

SEC.  2.  That  each  member  of  the  board  shall  receive 
a  salary  of  $10,000  per  year,  payable  monthly.  The  board 

190 


BOARD  OF  ADMINISTRATIVE  CONTROL 

shall  appoint  a  secretary,  who  shall  receive  a  salary  of 
$5,000  per  year,  payable  in  like  manner,  and  it  shall  have 
authority  to  employ  and  fix  the  compensations  of  such  spe- 
cial experts,  examiners,  clerks,  and  other  employees  as  the 
board  may  from  time  to  time  find  necessary  for  the  proper 
performance  of  its  duties.  All  employees  of  the  board 
shall  be  appointed  from  the  lists  of  eligibles  to  be  supplied 
by  the  Civil  Service  Commission  and  in  accordance  with 
the  civil-service  law.  All  of  the  expenses  of  the  board,  in- 
cluding all  necessary  expenses  for  transportation  incurred 
by  its  members  or  its  employees  under  their  orders  in  mak- 
ing any  investigation  or  upon  official  business  in  other  places 
than  in  the  city  of  Washington,  shall  be  allowed  and  paid 
on  the  presentation  of  itemized  vouchers  therefor  approved 
by  the  board. 

Unless  otherwise  provided  by  law,  the  board  may  rent 
suitable  offices  for  its  use  and  purchase  such  furniture, 
equipment,  and  supplies  as  may  be  necessary.  The  office 
of  the  board  shall  be  in  the  city  of  Washington,  but  the 
board  may,  by  one  or  more  of  its  members  or  such  agents 
as  it  may  designate,  prosecute  any  inquiry  necessary  to  its 
.  duties  in  any  part  of  the  United  States. 

SEC.  3.  That  it  shall  be  the  duty  of  said  board,  prior 
to  the  first  day  of  December  of  each  even-numbered  year, 
to  prepare  for  submission  to  the  Congress  estimates  of  the 
appropriations  necessary  for  the  conduct  of  the  Government 
for  the  two  fiscal  years  next  ensuing.  The  board  shall  also 
at  the  same  time  prepare  and  submit  estimates  of  the  rev- 
enues of  the  Government  for  the  same  period.  Such  esti- 
mates shall  be  in  the  form  prescribed  by  the  board,  and 
shall  be  supported  by  such  supplementary  statements  and 
details  as  may  be  necessary  for  their  full  understanding  by 
the  Congress.  The  board  shall  also,  with  the  approval  of 
the  President,  make  such  recommendations  for  the  modifi- 
cation, reorganization,  or  discontinuance  of  existing  serv- 
ices, or  the  establishment  of  additional  services  within  the 

191 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

various  branches  of  the  Government,  as  may  be  necessary 
or  desirable,  and  shall  accompany  the  same  with  a  state- 
ment of  the  reasons  for  such  proposed  modifications,  reor- 
ganization, discontinuance,  or  establishment,  and  in  the  case 
of  a  proposal  to  establish  a  new  service,  with  complete  and 
detailed  estimates  of  the  expenditures  involved  therein. 
The  estimates,  with  supporting  statements  and  accompany- 
ing recommendations,  shall  be  known  as  "the  budget." 

The  President  shall,  on  the  first  Monday  of  December 
of  each  even-numbered  year,  submit  the  budget  to  the  Con- 
gress with  his  recommendations. 

For  the  purpose  of  making  such  estimates  and  recom- 
mendations the  board  may  investigate  the  fiscal,  financial, 
and  business  methods  employed  by  the  departments  and 
branches  of  the  Government  and  in  all  Government  services. 
The  board  may  also  require  the  head  of  any  department,  or 
of  any  branch,  bureau,  or  office  thereof,  to  make  such  re- 
ports and  estimates  of  expenditures  or  revenues  to  it  as 
may  be  necessary  for  the  performance  of  the  duties  pre- 
scribed by  this  Act. 

SEC.  4.  That  the  board  shall  have  general  supervision 
of  the  accounts  and  accounting  of  the  departments  and 
services  of  the  Government,  and  may,  with  the  approval  of 
the  President,  prescribe  and  require  the  adoption  of  busi- 
ness methods  and  practices  and  uniform  systems  of  ac- 
counts and  accounting  within  and  for  said  executive 
departments  and  services. 

SEC.  5.  That  the  board  may  also,  with  the  approval 
of  the  President,  from  time  to  time  submit  to  the  Congress 
additional  or  supplemental  estimates  to  cover  deficiencies 
or  new  services,  and  hereafter  no  estimate  shall  be  submit- 
ted to  the  Congress  except  through  said  board. 


192 


APPENDIX  5 

BIBLIOGRAPHY 

Contents  items 

BIBLIOGRAPHIES 1-2 

GENERAL  REFERENCES 3-26 

FEDERAL  BUDGET 27-109 

1  Rider,  Harry  A.    Select  list  of  references  on  na- 

tional, state,  county  and  municipal  budgets  in 
the  United  States  .  .  .  [Philadelphia,  1915]  n 
p.  ( [American  academy  of  political  and  social 
science,  Philadelphia.]  Publication  954) 

[Reprinted  from  Public  budgets,  vol.  LXII  of  the  Annals 
of  the  American  academy  of  political  and  social  science, 
Philadelphia,  November,  1915.] 

2  U.  S.    Library  of  Congress.    Division  of  bibliog- 

raphy. List  of  recent  references  on  the  budget 
system.  Aug.  31,  1912.  5  numb.  1  (typewritten) 

GENERAL  REFERENCES 

3  Adams,  Henry  C.    Budgets  and  budgetary  legis- 

lation. (In  his  Science  of  finance.  New  York, 
1898.  p.  103-218) 

4  Allen,  William  H.     Ready  helps  in  budget  mak- 

ing. National  tax  association.  Bulletin,  May, 
1916,  v.  i :  91-3. 

s\5     American  academy  of  political  and  social  science, 

Philadelphia.      Public    budgets  .  .  .  Editor    in 

charge  of  this  volume:  Prof.  A.  R.  Hatton  .  .  . 

Philadelphia,  The  American  academy  of  political 

193 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

and  social  science,  1915.  324  p.  illus.  (Its  An- 
nals, vol.  LXII  [whole  no.  151]) 

Contents. — Foreword,  by  the  editor. — pt.  I.  The  budget 
idea  and  the  national  budget. — pt.  II.  State  budgets. — pt. 
III.  Public  budgets  and  efficiency  in  the  public  budgets. 
— pt.  IV.  Development  of  budgets  and  budgetary  proce- 
dure in  typical  cities. 

["These  discussions  are  concerned  with  the  more  compre- 
hensive features  of  fiscal  planning — including  a  budget 
program  for  the  national  government,  state  budgets,  effi- 
ciency through  budget  making,  and  budgets  in  European 
and  typical  American  cities.  Of  unusual  value  to  govern- 
mental executives,  as  well  as  to  students  of  governmental 
problems."  Papers  of  individual  authors  which  discuss 
the  general  question  of  the  budget  and  the  budget  of  the 
federal  government,  will  be  found  under  the  authors' 
names  in  this  bibliography] 

6  Bruere,  Henry.    The  budget  as  an  administrative 

program.  American  academy  of  political  and  so- 
cial science.  Annals,  Nov.,  1915,  v.  62:  176-91. 

["The  budget  is  the  basis  upon  which  administrative  plan- 
ning and  control  must  be  predicated"] 

7  Budgets;  federal,  state  and  local.    (In  Cyclopedia 

of  American  government.  New  York,  1914.  v. 
1:181-4) 

8  Bureau  of  municipal  research,  New  York.    How 

should  public  budgets  be  made?  How  budgets 
have  been  made,  how  budgets  are  made,  how  bud- 
gets should  be  made,  fourteen  stages  in  budget 
making.  [New  York]  Bureau  of  municipal  re- 
search, 1909.  19,  [i]  p.  incl.  facsims. 

[A  simple  exposition  of  budget  reform  for  the  average 
citizen,  showing  the  changes  needed  in  the  steps  of  budg- 
et-making, in  the  form,  in  the  restrictions  on  post-budget 
expenditure ;  in  budget  segregation,  and  in  the  attitude  of 
the  general  public  toward  the  budget] 

9  Cleveland,  Frederick  A.    Budget  making  and  the 

increased  cost  of  government;  with  discussioa 
194 


BIBLIOGRAPHY 

American  economic  review,  March,  1916,  sup., 
v.  6 :  50-84. 

[Compares  the  simplicity  of  procedure  of  the  Canadian 
and  other  governments  with  the  "involved,  the  occult,  the 
invisible  methods"  that  have  been  worked  out  in  our  fed- 
eral government  and  at  each  of  our  state  capitals] 

10    Principles  of  budget-making.    (In  his  Chap- 
ters on  municipal  administration  and  accounting. 
New  York,  1909.     p.  67-81 ) 

Reprinted  from  the  Journal  of  accountancy,  Oct., 
1907,  ¥.4:456-66. 

[The  budget  as  an  instrument  of  control ;  controlling  pur- 
poses of  the  budget ;  making  of  the  budget ;  the  adminis- 
trative importance  of  the  budget] 

11  Crennan,    Charles    H.      The    executive    budget. 

American  academy  of  political  and  social  science, 
Annals,  March,  1916,  v.  64:  146. 

[Reference  to  the  November,  1915,  issue  of  the  Annals, 
devoted  to  "Public  budgets"] 

12  Donaldson,  William  T.     The  budget  .  .  .  Janu- 

ary, 1916.  Fort  Wayne,  Fort  Wayne  printing 
co.,  1916.  30  p.  (Indiana.  Bureau  of  legisla- 
tive information.  Bulletin  no.  6) 

[The  Assistant  budget  commissioner  of  Ohio  explains  the 
nature  and  advantages  of  the  budget  system  and  discusses 
the  make-up  and  location  of  the  budget-making  authority] 

13  Ford,  Henry  J.    Budget  making  and  the  work  of 

government.  American  academy  of  political  and 
social  science.  Annals,  Nov.,  1915,  v.  62:  1-14. 

[An  outline  of  the  American  system  and  comparison  with 
the  English  budget  practice,  to  which  American  usage 
was  expected  to  conform,  by  the  framers  of  the  Constitu- 
tion] 

14  Goodnow,  Frank  J.    The  limit  of  budgetary  con- 

195 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

trol.  American  political  science  review,  Feb., 
1913,  sup.,  v.  7:68-77. 

["The  limit  of  budgetary  control  becomes  a  legal  question 
only  where  the  attempt  is  made  by  a  written  constitution 
or  a  statute  to  distinguish  between  powers  of  a  policy  de- 
termining character  which  are  vested  in  a  budget  making 
authority  and  powers  of  a  policy  executing  character 
which  are  vested  in  an  authority  possessed  of  executive 
or  administrative  functions  only"] 

15  Hatton,  Augustus  R.,  ed.  Public  budgets.  See 
American  academy  of  political  and  social  science, 
Philadelphia.  Public  budgets  .  .  .1915. 
^16  Lowrie,  Selden  G.  The  budget.  Madison,  Wis., 
Democrat  printing  company,  state  printer,  1912. 
259  p.  tables  (part  fold.) 

At  head  of  title:  Wisconsin  State  board  of  public  affairs. 
[The  results  of  a  scientific  examination  of  the  budget 
plans  used  in  different  states  and  cities.  In  addition  to 
setting  forth  the  general  theory  of  budget-making,  the 
budgetary  procedure  of  England,  France,  Germany,  Bel- 
gium, Switzerland,  Canada,  United  States  and  the  several 
states  of  the  United  States  are  described] 

17  Municipal  research,  to  promote  the  application  of 

scientific  principles  to  government.  Issued  .  .  . 
by  the  Bureau  of  municipal  research,  no.  I — 
July  1913 — New  York  [1913 — date] 

[Various  numbers  of  this  journal  contain  valuable  ma- 
terial on  the  budget.  Some  of  the  articles  are  analyzed 
elsewhere  in  this  bibliography] 

1 8  Norton,  Charles  D.    Constitutional  provision  for  a 

budget.  (In  Academy  of  political  science  of  the 
city  of  New  York.  Proceedings,  Oct.  1914,  v.  5 : 
189-92) 

["Our  federal,  state,  and  municipal  charters  and  consti- 
tutions have  surrounded  government  executives  with  fan- 
tastic regulations  which,  if  applied  in  private  business, 
would  certainly  wreck  any  enterprise  dependent  for  its 
existence  on  yearly  profits"] 


BIBLIOGRAPHY 

19    The  practical  side  of  budget  procedure, 

[with  appendix]    Municipal  research,  Feb.,  1915, 
no.  58,  p.  169-98. 

[Discussion  of  Mr.  Cleveland's  paper  at  the  meeting  of 
the  Academy  of  political  science,  Nov.  19,  1914] 

20  Powers,  Le  Grand.     Accounting  and  budgetary 

control.  (In  National  association  of  comptrollers 
and  accounting  officers.  Proceedings,  1910. 
Washington,  1911.  p.  26-31) 

Reprinted  in  the  Government  accountant,  Sept.,  1911, 
v.  5 : 212-8. 

21     Essentials  of  a  good  budget  from  the  view- 
point of  the  statistician  [with  discussion]     (In 
National  association  of  comptrollers  and  account- 
ing officers.     Proceedings,   1911.     Washington, 
1912.    p.  47-74) 

Extracts  from  this  address  are  found  in  the  Government 
accountant,  July,  1911,  v.  5:  112-9. 

22     Popular  control  of  governmental  finances 

by  executive  budgets.    Case  and  comment,  Mar., 
'1917,  v.  23:  823-7. 

["By  the  use  of  a  single  executive  budget  submitted  as  a 
financial  program,  governmental  organization  is  simpli- 
fied, and  its  methods  of  operation  brought  within  the  com- 
prehension of  all"] 

23  Prendergast,  William  A.     Efficiency  through  ac- 

counting. American  academy  of  political  and 
social  science.  Annals,  May,  1912,  v.  41 :  43-56. 

[This  paper  deals  with  the  relation  of  the  accounting  sys- 
tem to  the  budget] 

24  Spofford,  A.  R.     Budget.     (In  Lalor,  J.  J.  ed. 

Cyclopaedia  of  political  science,  political  economy, 
and  of  the  political  history  of  the  United  States. 
New  York,  1899.    v-  1:316 — 20) 
197 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

25  Willoughby,  William  F.  Nature  and  functions  of 
a  budget.  Chinese  social  and  political  science  re- 
view (Peking),  April,  1916,  v.  i:  86-101. 

[An  exposition  of  the  important  items  which  a  budget 
should  include,  viz.,  a  budgetary  message,  a  series  of  sum- 
mary or  analytical  tables,  a  balance  sheet,  a  budget  proper, 
the  administrative  reports  of  the  heads  of  the  several  ad- 
ministrative services  of  the  government,  and  such  other 
documents  as  may  serve  to  throw  light  upon  the  opera- 
tions and  problems  of  the  government] 

*  26    The  system  of  financial  administration  of 

Great  Britain ;  a  report  by  William  F.  Willough- 
by ...  Westel  W.  Willoughby  ...  [and] 
Samuel  McCune  Lindsay  .  .  .  New  York,  Pub- 
lished by  D.  Appleton  and  company  for  the  Insti- 
tute for  government  research,  1917.  361  p.  (In- 
stitute for  government  research.  Studies  in  ad- 
ministration) 
[Compares  British  with  American  system] 

FEDERAL  BUDGET 

27  Adams,  Ephraim  D.    The  control  of  the  purse  in 

the  United  States  government  .  .  .  [Lawrence, 
Kan.,  1894]  175-232,  iv  p. 

"Reprinted  from  the  Kansas  university  quarterly  for 
April,  1894" 

[Includes  discussion  of  the  development  of  financial  com- 
mittees in  the  House  of  representatives,  the  effect  of  busi- 
ness methods  in  Congress  upon  responsibility  for  financial 
action,  and  suggests  reforms] 

28  Balancing  the  federal  budget.     Outlook,  Dec.  8, 

1915,  v.  in:  832-3. 

29  Budget  system.     Outlook,  Mar.  7,  1917,  v.  115: 

403-4. 

[Shows  that  the  need  of  a  national  budget  system  was 
never  more  clearly  demonstrated  than  in  the  final  days 
of  the  Sixty-fourth  Congress] 

198 


BIBLIOGRAPHY 

30  Bullock,  Charles  J.     The  finances  of  the  United 

States  from  1775  to  1789,  with  especial  refer- 
ence to  the  budget  .  .  .  Madison,  Wis.,  The  Uni- 
versity, 1895.  273  p.  (Bulletin  of  the  Univer- 
sity of  Wisconsin.  Economics,  political  science, 
and  history  ser.,  v.  i,  no.  2) 

"Budget  and  the  history  of  budgetary  methods,"  p.  211- 
32 ;  "Development  of  a  budget  system  by  the  Continental 
Congress,"  p.  233-53 ;  "General  bibliography,"  p.  266-273. 

31     The  growth  of  federal  expenditures.    Politi- 
cal science  quarterly,  Mar.  1903,  v.  18:  97-111. 

32    The  growth  of  federal  expenditures  in  the 

United  States.    (In  his  Selected  readings  in  pub- 
lic finance,  Boston  [ci9o6]  p.  39-49) 

33  Bureau  of  municipal  research,  New  York.    The 

budget  idea  in  the  United  States.  Municipal  re- 
search, Jan.,  1916,  no.  69,  p.  48-67. 

34  Burton,  Theodore  E.     Economy  and  systematic 

appropriations.  Independent,  July  28,  1910,  v. 
69:  188-93. 

[The  Senator  from  Ohio,  through  his  long  connection 
with  the  House  Committee  on  rivers  and  harbors  and 
the  Senate  Committee  on  commerce,  is  eminently  fitted  to 
discuss  the  need  of  systematic  appropriations  for  water 
ways,  and  wiser  expenditure  thereof] 

35     Scandal  of  the  federal  appropriation  bills. 

World's  work,  Feb.  1913,  v.  25:  438-43. 

[The  scramble  to  get  money  from  Congress  for  local  ex- 
penditures regardless  of  national  interest  or  statesman- 
like economy — how  the  disgraceful  waste  of  public  funds 
may  be  averted] 

36  Chamber  of  commerce  of  the  United  States  of 

America.     Referendum  on  the  question  of  the 
plan   for   a  national   budget.     Nov.   30,    1912. 
[Washington,  1912]  15  p.    (Referendum  no.  i) 
199 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

[510  votes  were  cast  for  the  referendum  and  10  against 
it] 

37    Committee  on  the  national  budget.     The 

need  of  a  national  budget.     Report  of  the  Na- 
tional  chamber's   committee   presented   Feb.    9, 
1915,  at  the  Fourth  annual  meeting.     (Nation's 
business,  Feb.  1916,  v.  4,  no.  2,  p.  66-9) 

38  Chase,  Harvey  S.    A  financial  plan,  or  budget  for 

the  national  government.  Journal  of  account- 
ancy, July,  1914,  v.  18:  13-29. 

[An  address  before  the  National  association  of  comp- 
trollers and  accounting  officers,  Milwaukee,  June,  1914] 

39 Four  classifications  of  the  "budget"  of  the 

United  States  of  America  on  its  expenditure  side 
for  the  current  fiscal  year  ending  June  30,  1914 
.  .  .  Summarized  by  Harvey  S.  Chase,  (broad- 
side) 

[Classified  by  acts  of  appropriation,  organization  units, 
character  of  expenditure,  purposes  of  expenditure,  func- 
tions or  activities] 

40    A   national   budget  .  .  .   [Boston,    1914] 

122-135  p.  tables. 

"Reprinted  from  Quarterly  publications  of  the  American 
statistical  association,  June,  1914." 

41     The  national  budget.     [Extracts  from  an 

address  delivered  Dec.  6,  1913]     Journal  of  ac- 
countancy, Feb.  1914,  v.  17:  85-96. 

42     The  national  budget  on  its  "expenditure'' 

side.     An  address  before  the  Massachusetts  so- 
ciety of  certified  public  accountants  at  Boston, 
Mass.,  April  9, 1913  .  -  .   [Boston  ?  1913]    14  p. 
fold.  tab. 

Published  also  in  Journal  of  accountancy,  June,  1913,  v. 
H. 

200 


BIBLIOGRAPHY 

[The  national  budget  and  the  work  of  the  President's 
commission  on  economy  and  efficiency] 

43     National  expenditures  presented  in  budget 

form.    Nation's  business,  May  15, 1914,  v.  2 :  5-7. 

["A  budgetary  presentation  of  the  appropriations  now 
under  consideration  by  Congress,"  showing  how  business 
principles  may  be  applied  to  national  finances] 

44    The  national  finances.    Journal  of  account- 
ancy, Oct.,  1914,  v.  18:  276-95. 

[Address  before  the  American  association  of  public  ac- 
countants, Washington,  Sept.,  1914] 

45     Why  should  we  have  a  national  budget? 

What  a  government  budget  is  and  how  it  serves 
the  nation's  house  keeping.     Nation's  business, 
April  15,  1915,  v.  3:  12-13. 

This  address  before  the  third  annual  meeting  of  the 
Chamber  of  Commerce  of  the  United  States  was  also  sep- 
arately printed  in  a  pamphlet  of  18  pages. 

46  Cleveland,  Frederick  A.    The  budget  as  a  means 

of  locating  responsibility  for  waste  and  ineffi- 
ciency. What  the  President  is  trying  to  do  by 
way  of  budget  making  for  the  national  govern- 
ment .  .  .  New  York,  Academy  of  political  sci- 
ence, 1912.  16  p. 

Advance  sheets  from  the  Proceedings  of  the  Academy  of 
political  science,  vol.  Ill,  no.  2. 

47    Causes  of  waste  and  inefficiency  in  national 

government.    American  review  of  reviews,  Apr. 
1912,  v.  45:  466-71. 

[Lack  of  a  definite  program  of  public  business  and  of 
central  direction  and  control ;  losses  due  to  bad  organiza- 
tion, inefficient  personnel  and  equipment,  and  wasteful 
methods  of  contracting  and  purchasing] 

48    Evolution  of  the  budget  idea  in  the  United 

201 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

States.  American  academy  of  political  and  social 
science.  Annals,  Nov.,  1915,  v.  62:  15-35. 

["Taken  as  a  whole  it  may  be  said  that  until  the  last  few 
years  the  'budget  idea'  as  the  term  is  here  used,  has  had 
no  evolution  whatever  in  the  United  States."  Account  of 
President  Taft's  efforts  for  a  budget  and  the  work  of  the 
President's  Commission  on  economy  and  efficiency] 

49    Federal  budget :  what  the  president  is  trying 

to  do  by  way  of  budget  making  for  the  national 
government.  (In  Academy  of  political  science  of 
the  city  of  New  York.  Proceedings,  Jan.  1913, 
v.  3:165-79) 

[Review  of  President  Taft's  work  on  behalf  of  a  federal 
budget] 

50 How  we  have  been  getting  along  without  a 

budget.  American  political  science  review,  Feb. 
1913,  sup.,  v.  7:  47-67. 

Part  of  the  Proceedings  of  the  American  political  science 
association  at  its  ninth  annual  meeting,  Boston  and  Cam- 
bridge, Dec.  27-31,  1912. 

5 1     What  a  budget  may  mean  to  the  administra- 
tion.    (In  Illinois  University.     Conference  on 
commercial    education    and    business    progress, 
1913.     Urbana-Champaign,  1913.     p.  35-50) 

[It  requires  executive  leadership,  necessitates  executive 
protection  against  criticism,  makes  a  general  system  of  ac- 
counting and  reporting  essential,  necessitates  the  develop- 
ment of  an  efficient  personnel,  and  requires  adaptation  of 
organization  to  work  to  be  done] 

52    What  is  involved  in  the  making  of  a  national 

budget.    Journal  of  accountancy,  May,  1913,  v. 
15:  313-28. 

Printed  also  in  Proceedings  of  the  Efficiency  society,  New 
York,  Jan.  28,  1913. 

202 


BIBLIOGRAPHY 

53     Why  we  have  a  pork  barrel.    New  repub- 
lic, July  22,  1916,  v.  7:  294-6. 

[Lack  of  a  budget  assigned  as  the  main  reason  for  log- 
rolling and  pork-barrel  methods] 

54  Collins,  Charles  W.     Coming  of  the  budget  sys- 

tem. South  Atlantic  quarterly,  Oct.,  1916,  v.  15: 
309-18. 

[Author  believes  the  adoption  of  a  budget  system  would 
eliminate  "log-rolling"  entirely  and  enable  the  "sovereign 
citizen  to  keep  a  closer  watch  on  his  public  servants"] 

55     Constitutional  aspects  of  a  national  budget 

system.    Yale  law  journal,  March,  1916,  v.  25: 
376-85. 

56    The    national    budget    system  .  .  .  New 

York,  The  Macmillan  company,  1917.    151  p. 

[An  attempt  to  show  in  brief  compass  what  the  budget 
system  is,  why  it  is  needed  for  the  United  States,  and 
what  adjustments  could  be  made  short  of  a  constitutional 
amendment  to  secure  its  adoption] 

57    comp.    Extracts  from  current  discussions 

relating  to  the  adoption  of  a  national  budget  sys- 
tem by  the  United  States.     75  numb.  1.   (type- 
written) 

58  Confusion  in  Congress.    Nation,  Dec.  30,  1915,  v. 

101 :  767-8. 

[Reasons  why  Congress  failed  to  act  upon  President 
Taft's  recommendation  for  a  budget] 

59  Congress  and  a  budget.     [Editorial]     Journal  of 

accountancy,  Dec.,  1912,  v.  14:  487-93. 

[Discussion  of  a  national  budget  one  question  to  come 
before  the  last  session  of  the  62d  Congress.  Outline  of 
President  Taft's  recommendation] 

60  Coulson,  R.  E.    Planning  the  nation's  spending; 

what  a  budget,  a  work-and-finance  program  for 
203 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

the  government,  would  save  the  country.  Sys- 
tem (Chicago),  June,  1913,  v.  23:  612-9. 

[A  clear,  concise  article;  illustrated  with  charts] 
'• 

61  Daniels,  Winthrop  M.    The  element  of  public  fi- 

nance, including  the  monetary  system  of  the 
United  States  .  .  .  New  York,  H.  Holt  and  com- 
pany, 1899.  383  P- 

"Theories  of  public  expenditure,"  p.  25-33;  "Expendi- 
tures in  the  United  States,"  p.  34-52 ;  "Budgetary  legisla- 
tion," p.  344-73- 

62  Debate  in  the  House  of  Representatives  on  the 

appropriations  for  the  Bureau  of  education.    Ed- 
ucational review,  Feb.  1911,  v.  41:  170-92. 
[An  example  of  congressional  need  of  a  national  budget] 

63  Demand  for  a  national  budget.    Economic  world 

(New  York),  March  n,  1916,  n.  s.  v.  n :  338-40. 

[Reference  to  the  passing  of  the  referendum  in  favor  of 
a  national  budget  by  the  Chamber  of  commerce  of  the 
United  States  in  1915.  Tabulation  by  H.  S.  Chase,  cov- 
ering the  national  budget  on  its  "expenditure"  side,  based 
on  the  Book  of  estimates  for  1914-15,  1915-16  and  1916- 
17] 

64  Dunn,  A.  W.    How  a  business  man  would  run  the 

government.  World's  work,  Apr. -June,  1911,  v. 
21 :  14256-64;  v.  22:  14359-68,  14481-86. 

65  Fellows,  F.  P.    A  century's  growth  in  federal  ex- 

penditures; a  comparison  of  the  estimates  for 
1802  with  expenditures  for  1911.  National  mag- 
azine, Apr.  1911,  v.  33:  795-9. 

66  Fitzgerald,  John  J.     American  financial  methods 

from  the  legislative  point  of  view.  Municipal 
research,  June,  1915,  no.  62,  p.  299-346. 

[Mr.  Fitzgerald,  chairman  of  the  House  committee  on 
appropriations,  gives  his  experiences  and  suggestions  in 

204 


BIBLIOGRAPHY 

regard  to  financial  legislation  as  he  has  seen  it  in  Con- 
gress, before  the  New  York  State  Constitutional  conven- 
tion committee  on  finances,  revenues  and  expenditures] 

67  Ford,  Henry  J.    The  cost  of  our  national  govern- 

ment; a  study  in  political  pathology  .  .  .  New 
York,  The  Columbia  university  press,  1910.  147 
p.  (Columbia  university  lectures.  George  Blu- 
menthal  foundation,  1909) 

"Making  the  national  budget,"  p.  11-21;  "Constitutional 
agencies  of  budget-control/'  p.  22-32 ;  "Budget  procedure 
in  the  House  of  representatives,"  p.  127-33. 

68  Fuller,  H.  B.    How  Congress  squanders  our  mon- 

ey. III.  Our  rapidly  increasing  appropriations 
and  their  remedy.  Lippincott's  magazine,  July, 
1912,  v.  90:  78-86. 

[Shows  need  of  a  budget  or  of  a  constitutional  amend- 
ment permitting  the  President  to  veto  separate  items  in 
appropriation  bills] 

69     Wasting  the  government's  money.    How  it 

is  done  in  the  public  buildings  bill.     World's 
work,  Feb.  1911,  v.  21:  14001-8. 

[Need  of  a  "public  buildings  budget"] 

70  Garfield,  James  A.     National  appropriations  and 

misappropriations.  North  American  review, 
June,  1879,  v.  128:  572-86. 

[Methods  of  appropriating  revenue;  Republican  and 
Democratic  appropriations ;  permanent  and  indefinite  ap- 
propriations ;  abuse  of  unexpended  balances ;  deficiencies ; 
contingent  funds;  recent  examples  of  bad  legislation; 
general  legislation  on  appropriation  bills] 

71  Hendrick,  B.  J.     Shall  we  have  responsible  gov- 

ernment?    I.     The  budget  system  vs.  the  pork 
barrel.    II.    The  budget  system  and  "R.  &  H." 
205 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

pork.  World's  work,  Dec.  1915 — Jan.,  1916,  v. 
31:  189-202,273-85. 

[Story  of  the  new  movement  to  curb  congressional  ex- 
travagance and  to  put  the  government's  fiscal  system  on 
a  common  sense  basis.  Includes  portraits  of  congress- 
men who  have  worked  for  reforms  in  river  and  harbor 
and  other  appropriations] 

72  Herrick,  M.  T.    The  burden  of  waste  in  public  ex- 

penditures. American  review  of  reviews,  May, 
1910,  v.  41 :  600-3. 

[Alleges  a  waste  of  $300,000,000  a  year  in  operating  the 
government,  due  to  unbusinesslike  financial  system] 

73  Jagger,  William.    To  the  people  of  Suffolk,  of  all 

parties.  By  William  Jagger.  New  York,  Print- 
ed for  the  author,  by  Craighead  &  Allen,  1838. 
i6p. 

[A  protest  against  the  enormous  expenses  of  our  gov- 
ernment] 

74  Johnson,  Allen.    American  budget-making.    Yale 

review,  Feb.  1910,  v.  18:  363-71. 

["Observing  our  methods  of  congressional  finance,  an 
intelligent  Englishman  is  sure  to  ask,  'Where  is  your 
Chancellor  of  the  exchequer,  your  responsible  minister 
charged  with  the  duty  of  making  up  the  budget  ?'  Where, 
indeed."  The  article  attempts  to  explain  the  omission] 

75  National  budget.    Outlook,  April  4,  1917,  v.  115: 

607. 

[Includes  a  budget  sketch  for  the  fiscal  year  beginning 
July  i,  1917  and  ending  with  June  30,  1918] 

76  The  need  of  a  budget.    Outlook,  Dec.  19,  1917,  v. 

117:  629. 

77  New  York  (State)     Constitutional  convention, 

1915.    Joint  meeting  of  the  committees  on  gov- 
206 


BIBLIOGRAPHY 

ernor  and  other  state  officers  and  state  finances 
with  Hon.  William  Howard  Taft,  ex-president 
of  the  United  States.  Albany,  1915.  29  p. 
(Doc.  no.  n) 

Published  also  in  Municipal  research,  June,  1915,  no.  62: 
347-64,  under  the  title :  American  financial  methods  from 
the  executive  point  of  view,  by  Hon.  William  Howard 
Taft. 

78  New  York   (State)     Constitutional  convention, 

1915.  Meeting  of  the  committee  on  state  fi- 
nances, with  Hon.  John  J.  Fitzgerald  [chairman 
of  the  committee  of  appropriations  of  the  House 
of  representatives]  Albany,  1915.  53  p.  (Doc. 
no.  15) 

Published  also  in  Municipal  research,  June,  1915,  no.  62: 
299-346  under  the  title:  American  financial  methods 
from  the  legislative  point  of  view,  by  Hon.  John  J. 
Fitzgerald. 

79  Proceedings  at  a  meeting  held  December  6,  1913, 

to  discuss  the  "Federal  income  tax,"  the  pending 
"currency  bill"  and  the  "national  budget,"  at  the 
offices  of  Harvey  S.  Chase  &  company  .  .  . 
Washington,  D.  C.  n.  p.  [1913?]  27  p. 

Includes  address  by  H.  S.  Chase  on  "The  national  budg- 
et," with  discussion. 

80  Renick,  E.  I.     The  control  of  national  expendi- 

tures. Political  science  quarterly,  June,  1891,  v. 
6:248-81. 

For  a  different  view,  see  Thompson,  N.  H.  The  control 
of  national  expenditures. 

8 1  Roosevelt,  Theodore.    The  remedy  for  some  forms 

of  selfish  legislation.    Outlook,  Aug.  6,  1910,  v. 

95:759-63. 

207 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

[The  business  of  the  nation  should  be  performed  by  ex- 
perts in  various  lines,  who  would  be  held  to  the  most 
rigid  accountability.  Special  commissions  recommend- 
ed] 

82  Rossiter,  W.  S.    Federal  expenditures  under  mod- 

ern conditions.  Atlantic  monthly,  May,  1911,  v. 
107:  625-31. 

[Among  other  reforms  needed  in  administration  of  fed- 
eral affairs,  the  author  discusses  the  subject  of  unex- 
pended balances,  and  recommends  organization  of  a 
standing  committee  in  each  House  of  Congress  to  inquire 
and  report  concerning  them] 

83  Sands,  H.  R.  and  Lindars,  F.  W.     Efficiency  in 

budget  making.  American  academy  of  political 
and  social  science.  Annals,  May,  1912,  v.  41 : 
138-50- 

[Two  members  of  the  New  York  Bureau  of  municipal 
research  make  suggestions  for  efficient  budget-making] 

84  Statement  of  arguments  favoring  a  national  budg- 

et. Analysis  of  report  on  national  budget  and 
its  advantages,  showing  the  extraordinary  confu- 
sion attendant  upon  national  financing  through 
the  evolution  of  temporary  devices.  Nation's 
business,  Nov.  18,  1912,  v.  I,  no.  4,  p.  1-2. 

85  Taft,  William  H.     American  financial  methods 

from  the  executive  point  of  view.  Municipal  re- 
search, June,  1915,  no.  62,  p.  347-64. 

[Ex-President  Taft  states  his  views  before  the  Commit- 
tees on  governor  and  other  officers  and  state  finances  of 
the  New  York  state  constitutional  convention.  He  was 
introduced  as  the  only  American  President  who  ever  at- 
tempted to  create  a  really  scientific  budget  of  the  federal 
expenditures] 

86  Tawney,  James  A.    Federal  appropriations :  their 

rapid  increase;  the  principal  causes  and  how  to 
208 


BIBLIOGRAPHY 

check  them.  American  review  of  reviews.  Sept. 
1910,  v.  42 1343-8. 

[The  Chairman  of  the  House  committee  on  appropria- 
tions, Sixty-first  Congress,  assigns  our  lack  of  a  budget 
system  as  one  of  the  causes  of  increase  in  appropria- 
tions] 

87  Thompson,  N.  H.    The  control  of  national  expen- 

ditures. A  different  view.  Political  science  quar- 
terly, Sept.  1892,  v.  7:  468-82. 

For  another  view,  see  Renick,  E.  I.  The  control  of  na- 
tional expenditures. 

88  Two  billion-dollar  Congress :  a  national  budget  the 

remedy  for  extravagance  in  appropriations.  Cen- 
tury, June,  1913,  v.  86:  313-4. 

89  U.  S.    Bureau  of  statistics  (Treasury  dept.)    Re- 

ceipts, expenditures,  and  debt  of  the  United 
States,  1789-1896,  with  annual  appropriations 
made  by  Congress,  1873-1896.  Prepared  by  the 
Bureau  of  statistics  .  .  .  [Washington,  Govt. 
print,  off.,  1896]  23  p.  incl.  tables. 

90    Bureau  of  the  census.    Expenditures  of  the 

United  States  government,  1791-1907.    General 
revenue;  postal  revenue;  per  capita  expenditure. 
Washington,  Govt.  print,  off.,  1908.    42  p. 

91     Congress.    Appropriations,  new  offices,  etc. 

Statements  ...  Washington,  Govt.  print,  off., 
1893  to  date. 

Prepared  under  the  direction  of  the  committees  on  appro- 
priations of  the  Senate  and  House  of  representatives. 
Pub.  in  the  Congressional  series  of  United  States  public 
documents  from  the  iQth  Cong.,  ist  sess.  (Serial  no. 
140)  That  issue  has  title :  .  .  .  Statement  of  appropria- 
tions made  during  the  first  session  of  the  Nineteenth  Con- 
gress. 

209 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

92 President,  ipop-ip/j  (Taft)  Copy  of  let- 
ter sent  by  the  President  to  the  secretary  of  the 
Treasury  relative  to  the  submission  of  a  budget 
to  Congress.  Washington  [Govt.  print,  off.] 
1912.  8  p. 

93 Message  of  the  President  of  the  United 

States  on  economy  and  efficiency  in  the  govern- 
ment service  .  .  .  Washington  [Govt.  print,  off.] 

1912.  2  v.     (62d  Cong.,  2d  sess.  House.    Doc. 
458)     Serial  no  6296-7 

Appendix :  Report  to  the  President  on  the  reorganization 
of  the  government  of  the  United  States  as  it  existed  July 
i,  1911,  shown  by  an  outline  of  organization  with  recom- 
mendations .  .  .  Submitted  by  the  Commission  on  econ- 
omy and  efficiency,  November,  1911. 
[The  use  of  the  "outline  of  organization"  in  the  prepara- 
tion of  a  budget  is  described  on  p.  86  of  the  Report] 

94 Message  of  the  President  of  the  United 

States,  submitting  for  the  consideration  of  the 
Congress,  a  budget  with  supporting  memoranda 
and  reports  .  .  .  Washington  [Govt.  print,  off.] 

1913.  433  p.  incl.  tables.     (62d  Cong.  3d  sess. 
Senate.     Doc.  113)     Serial  No.  6353. 

[The  budget  submitted  was  for  the  year  1914] 

95 President's  commission  on  economy 

and  efficiency.  The  need  for  a  national  budget. 
Message  from  the  President  of  the  United  States, 
transmitting  report  of  the  Commission  on  econ- 
omy and  efficiency  on  the  subject  of  the  need  for 
a  national  budget  .  .  .  Washington  [Govt.  print, 
off.]  1912.  568  p.  (62d  Cong.,  2d  sess.  House. 
Doc.  854)  Serial  no.  6300. 

Frederick  A.  Cleveland,  chairman. 

Part  I.    History  and  present  practice  of  Congress  and  the 

210 


BIBLIOGRAPHY 

Executive  in  relation  to  estimates  and  appropriations. 
Part  II.  Discussion  of  the  constructive  recommendations 
of  the  Commission.  Part  III.  The  form  of  budget  and 
supporting  documents.  Appendices.  Digest  of  existing 
laws  governing  estimates  and  appropriations,  bibliography 
of  Congressional  inquiries.  Statement  of  budget  meth- 
ods and  procedure  in  foreign  countries,  prepared  by  the 
Commission  and  returned  by  foreign  representatives. 

96    Treasury  dept.    Annual  report  of  the  sec- 
retary of  the  Treasury  on  the  state  of  the  fi- 
nances .  .  .  With     appendices.       Washington, 
1801  to  date. 

"Issued  since  1801  in  compliance  with  the  provisions  of 
act  of  May  10,  1800."  Found  also  in  the  series  of  Con- 
gressional documents. 

Reports  for  1801-1828  were  reprinted  in  2  v.  with  the 
reports  of  Alexander  Hamilton,  on  public  credit,  on  a 
national  bank,  on  manufactures,  and  on  the  establishment 
of  a  mint,  prefixed.    Washington. 
Printed  by  D.  Green,  1828-29. 

Reports  for  1801-1828  were  again  reprinted,  together  with 
those  for  1829-1849  in  7  v.  Washington,  Printed  by 
Blair  &  Rives,  1837-51. 

[In  addition,  a  large  number  of  special  returns  regarding 
expenditures  are  made  to  Congress  which  are  printed 
as  House  documents.] 

97    Letter   from   the   secretary  of   the 

Treasury,  transmitting  estimates  of  appropria- 
tions required  for  the  service  of  the  fiscal  year 
ending  June  30  ...  Washington,  1799  to  date. 

[In  addition,  numerous  requests  for  appropriations  are 
submitted  from  time  to  time  to  meet  deficiencies,  new 
needs,  etc.] 

98 Division  of  bookkeeping  and  war- 
rants. Combined  statement  of  the  receipts  and 
disbursements  of  the  United  States  .  .  .  1871- 
72  to  date.  [Washington,  1873  to  date] 

99 .  .  .  Digest  of  appropriations 

for  the  support  of  the  government  of  the  United 
211 


THE  PROBLEM  OF  A  NATIONAL  BUDGET 

States  .  .  .  Washington,  Govt.  print,  off.,  1872 
to  date. 

100 Statement  of  balances,  appro- 
priations and  expenditures  of  the  government 
for  the  fiscal  year  ended  June  30,  1893  [-1911] 
Washington,  Govt.  print,  off.  [i893]-i9i2.  19 
v.  in  6. 

Discontinued  as  a  separate  publication  and  consolidated 
with  the  "Combined  statement  of  the  receipts  and  dis- 
bursements, balances,  etc.,  of  the  United  States  .  .  . 
1912"— 

101  Walker,  E.  G.     The  government  as  a  spender. 

American  review  of  reviews,  July,  1908,  v.  38: 
67-71. 

[Record  of  the  congressional  appropriations  for  1908- 
1909,  and  some  account  of  how  these  appropriations  were 
handled  in  the  House.] 

1 02  War  and  the  budget  system.    World's  work,  July, 

1917,  v.  34:  247. 

[Senator  Kenyon's  bill,  providing  for  appointment  of  a 
commission  to  adopt  a  workable  budget  plan,  strongly 
commended] 

103  What  a  national  budget  would  make  clear.    Na- 

tion's business,  June  16,  1913,  v.  i,  no.  12,  p.  n. 

[Includes  diagram  illustrating  the  inter-relation  of  the 
nine  committees  on  appropriations  and  the  various  depart- 
ments and  establishments] 

104  What  an  executive  budget  might  do.     Nation, 

Dec.  14,  1916,  v.  103:  555-6. 

105  Williams,  John  S.     The  supply  bills.     Article  by 

Hon.  John  Sharp?  Williams  concerning  the  con- 
stitutional power  of  the  House  of  representa- 
tives to  originate  supply  bills  .  .  .  Washington, 
Govt.  print,  off.,  1912.  16  p.  ([U.  S.]  62d 
212 


BIBLIOGRAPHY 

Cong.,  2d  sess.  Senate.  Doc.  872)  Serial  no. 
6178. 

[Contains  numerous  quotations  from  official  documents 
and  speeches  in  support  of  his  argument] 

106  Willoughby,  William  F.  Allotment  of  funds  by 
executive  officials  an  essential  feature  of  any  cor- 
rect budgetary  system.  American  political  sci- 
ence review,  Feb.,  1913,  sup.,  v.  7:  78-87. 

Part  of  the  Proceedings  of  the  American  political 
science  association  at  its  ninth  annual  meeting. 
Boston  and  Cambridge,  Dec.  27-31,  1912. 

!O7  The  correlation  of  the  organization  of  Con- 
gress with  that  of  the  executive.  American  po- 
litical science  review,  Feb.,  1914,  sup.,  v.  8:  155- 

67. 

Part  of  the  Proceedings  of  the  American  political 
science  association  at  its  tenth  annual  meeting, 
Washington,  D.  C.,  Dec.  30,  I9i3-Jan.  i,  1914. 

[Discusses  relation  of  the  two  branches  in  respect  to 
budgetary  matters] 

1 08 The  national  government  as  a  holding  cor- 
poration: the  question  iof  subsidiary  budgets. 
Political  science  quarterly,  Dec.,  1917,  v.  32: 

505-2L 

109  Wooley,  R.  W.  How  Washington  wastes  your 
money.  Pearson's  magazine,  Oct.  1910,  v.  24: 
462-70. 

[Special  instances  of  government  waste,  proving  our 
need  of  a  budget] 


INDEX 


Accounting  system,  steps  essen- 
tial in  securing,  19;  present 
system  inadequate  in  United 
States  government,  56;  inde- 
pendent, should  be  installed  in 
subsidiary  service  corporations, 
88-89. 

Activities,  classification  of  funds 
by,  12. 

Agriculture,  Department  of,  sys- 
tem of  transfer  of  appropria- 
tions provided  in,  53. 

Alaskan  Engineering  Commis- 
sion, segregation  of  financial 
operations  of,  5 ;  should  be  sub- 
sidiary corporation,  78;  powers 
of  subsidiary  legislation  con- 
ferred upon,  94. 

Anderson,  Hon.  Sydney,  bill  in- 
troduced by,  calling  for  crea- 
tion of  Board  of  Administra- 
tive Control  under  direction  of 
President,  152. 

Appropriation  act,  purpose  of, 
44. 

Appropriations,  transfer  of,  be- 
tween departments  in  Great 
Britain,  48;  system  of  transfer 
of,  adopted  by  Porto  Rico,  New 
Jersey,  Tennessee,  Ohio,  50^; 
lump-sum,  made  by  Congress, 
53;  system  of  transfer  of,  pro- 
vided for  Department  of  Agri- 
culture, Coast  and  Geodetic 
Survey,  Panama  Canal,  53; 
Committee  on,  power  of,  under 


proposed  budgetary  system,  67- 
69 ;  duties  of,  72 ;  provision  for 
sub-allotment  of,  by  executive 
officials,  83;  present  and  pro- 
posed system  for  consideration 
by  Congress,  101-102;  proposal 
made  by  President  Wilson  in 
December,  1917,  for  single 
committee  on,  109;  proposed 
membership  of,  in;  plan  for 
handling,  under  proposed  com- 
mittee system,  107-110;  spend- 
ing of,  determined  by  Con- 
gress, 117. 

Arsenals,  should  be  subsidiary 
corporations,  79. 

Balance  sheet,  should  accompany 
budget,  7;  none  provided  in 
present  system  of  United 
States  government,  57. 

British  Treasury,  functions  of, 
36,  61 ;  difference  between  sys- 
tem of,  and  American  sys- 
tem, 72;  loans  made  by,  to 
subsidiary  service  corpora- 
tions, 89. 

Budget,  precise  meaning  of,  2. 

California  State  Board  of  Con- 
trol, an  organ  of  general  ad- 
ministration, 37. 

Capital  outlay,  definition  of,  13; 
for  subsidiary  service  corpora- 
tions, 89. 

Census,   Bureau   of  the,   appro- 


215 


INDEX 


priation  for  the  thirteenth  cen- 
sus, 117. 

Chance,  Merrit  O.,  member  of 
Commission  on  Economy  and 
Efficiency,  144. 

Chase,  Harvey  S.,  member  of 
Commission  on  Economy  and 
Efficiency,  144;  articles  written 
by,  urging  the  adoption  of 
scientific  budgetary  system, 

154. 

Chief  Executive,  budgetary  mes- 
sage of,  should  accompany 
budget,  8;  budget  should  be 
prepared  by,  30;  should  be 
head  of  administration,  31. 

Cleveland,  Dr.  Frederick  A., 
chairman  of  Commission  on 
Economy  and  Efficiency,  144. 

Coast  and  Geodetic  Survey,  sys- 
tem of  transfer  of  appropria- 
tions provided  in,  53. 

Commission  on  Economy  and  Ef- 
ficiency, classification  of  ob- 
jects of  expenditures  made  by, 
15;  outline  of  organization  of 
national  government  by,  18; 
reports  on  the  problem  of  a 
national  budget  by,  65;  mem- 
bers and  work  of,  144. 

Committee  system  of  Congress, 
plan  to  secure  harmonious  re- 
lations between  executive 
branch  of  government  and, 
105 ;  plan  for  handling  matters 
of  general  legislation  and  ap- 
propriations under,  109. 

Congress,  control  over  revenues 
and  expenditures  by,  63,  66 ;  in- 
creasing duties  of,  75;  manner 
in  which  appropriations  should 
be  made  by,  83;  authority  not 
lessened  by  establishment  of 


subsidiary  service  corporations, 
90-93 ;  a  board  of  directors  and 
a  general  lawgiver,  97-98; 
failure  to  organize  as  a  direct- 
ing and  supervising  board,  99- 
100;  present  system  employed 
by,  for  consideration  of  appro- 
priations, 102;  manner  in 
which  appropriations  shall  be 
expended  determined  by,  116; 
important  functions  of,  in  re- 
spect to  operations  of  the  gov- 
ernment, 119;  two  ways  in 
which  it  can  exercise  super- 
vision and  control,  120;  func- 
tions of,  as  a  board  of  direc- 
tors, 122;  determination  of,  to 
exercise  administrative  author- 
ity shown  in  early  days,  132. 

Cost  of  governmental  operations, 
analysis  of,  10. 

Council  of  National  Defense, 
functions  of,  162. 

Current  expenses,  definition  of, 
14. 

Departments,  grouping  of  ser- 
vices in,  160-161. 

Democratic  Party,  plank  intro- 
duced in  platform  of,  demand- 
ing introduction  of  budget  sys- 
tem, 156. 

District  of  Columbia,  principle  of 
subsidiary  service  corporation 
adopted  by  Congress  for,  91. 

Engraving  and  Printing,  Bureau 
of,  should  be  subsidiary  cor- 
poration, 79;  independent  ac- 
counting and  reporting  system 
should  be  installed  in,  89. 

Estimates,  not  compiled  in  ac- 
cordance with  one  principle, 


216 


INDEX 


56;  should  be  referred  to  com- 
mittee on  appropriations,  no; 
acts  authorizing  Secretary  of 
Treasury  to  prepare  and  sub- 
mit to  Congress,  131 ;  acts  au- 
thorizing the  preparation  of,  by 
department  heads,  134. 

Executive  budget,  adoption  of,  In 
Maryland,  New  Mexico  and 
Utah,  43«. 

Expenditure  by  funds,  classifica- 
tion of,  lo-n. 

Expenditure  documents,  uniform 
system  of,  desirable,  56 

Expenditures,  data  essential  re- 
garding character  of,  13;  in- 
formation necessary  regarding 
object  of,  15;  no  classification 
officially  adopted,  56. 

Federal  Farm  Loan  Board,  pow- 
ers of  subsidiary  legislation 
conferred  upon,  94. 

Federal  Reserve  Board,  powers 
of  subsidiary  legislation  con- 
ferred upon,  94. 

Federal  Trade  Commission,  pow- 
ers of  subsidiary  legislation 
conferred  upon,  94. 

Fitzgerald,  Hon.  John  J.,  ex- 
tracts from  speeches  of,  urging 
the  introduction  of  budgetary 
system,  147-149. 

Fixed  charges,  definition  of, 
14. 

Forest  Service  should  be  subsid- 
iary corporation,  79. 

General  Land  Office  should  be 
subsidiary  corporation,  79. 

General  Supply  Committee 
should  be  subsidiary  corpora- 
tion, 79;  independent  account- 


ing and  reporting  system 
should  be  installed  in,  89. 

Goodnow,  Prof.  Frank  J.,  mem- 
ber of  Commission  on  Econ- 
omy and  Efficiency,  144. 

Goodwin,  Hon.  William  S.,  reso- 
lution introduced  in  House  by, 
to  report  plan  for  adoption  of 
a  budgetary  system,  151. 

Government  Printing  Office 
should  be  subsidiary  corpora- 
tion, 79;  independent  account- 
ing and  reporting  system  should 
be  installed  in,  89. 

Great  Britain,  budget,  prepara- 
tion and  action  upon  by  Minis- 
try, 41,  58,  70;  budgetary  prac- 
tice, use  of  transfers  between 
appropriations  heads  in,  48; 
"votes"  in,  49;  "virement"  in, 
49;  budget,  power  of  Parlia- 
ment with  reference  to,  60; 
concentration  of  legislative  and 
executive  functions  in,  104, 
"3- 

Heffernan,  W.  O.,  lump-sums 
versus  itemized  appropriations 
in  Ohio,  45. 

Holding  corporation,  general 
government  a,  76. 

Illinois  Department  of  Finance, 
organ  of  general  administra- 
tion, 37. 

Indian  Affairs,  Bureau  of,  should 
be  subsidiary  corporation, 

79- 

Industrial  or  commercial  enter- 
prises, services  engaged  in, 
should  be  subsidiary  corpora- 
tions, 78. 

Interstate     Commerce     Commis- 


217 


INDEX 


sion,  powers  of  subsidiary  leg- 
islation conferred  upon,  94. 

Jeze,  M.  G.,  definition  of  a  budg- 
et, 2n. 

Kenyon,  Hon.  William  S.,  joint 
resolution  introduced  in  Senate 
by,  regarding  adoption  of  a 
budgetary  system,  150;  other 
efforts  made  by,  to  secure  budg- 
etary system,  151. 

Legislation,  difficulties  presented 
in  considering  matters  of,  at 
the  1911-12  session  of  Con- 
gress, 1 08. 

Legislation,  general,  plan  for 
handling  under  proposed  com- 
mittee system,  107-110. 

Legislature,  power  of,  to  modify 
budget  proposals,  38. 

Leroy-Beaulieu,  definition  of  a 
budget,  2n. 

MacVeagh,  Hon.  Franklin,  calls 
attention  to  care  given  to  com- 
piling of  estimates  by  President 
and  Cabinet,  138;  in  reports  to 
Congress  for  1909-10-11-12, 
urges  the  introduction  of  a 
budgetary  system,  138-143. 

Maryland,  adoption  of  executive 
budget  in,  43^. 

Medical  Corps,  Public  Health 
Service,  8$n. 

Minnesota,  allotment  system 
adopted  by,  5iw. 

"Movement  for  Budgetary  Re- 
form in  the  States,"  cited,  45^ 


National  Parks  Service  should  be 
subsidiary  corporation,  79. 


Navy  Yards  should  be  subsidiary 
corporations,  79. 

New  Jersey,  system  of  transfers 
between  appropriation  heads 
adopted  by  New  Jersey,  50. 

New  Mexico,  adoption  of  exec- 
utive budget  in,  43^. 

Nitrate  Plant  (proposed)  should 
be  subsidiary  corporation,  79. 

Ohio,  lump-sums  versus  itemized 
appropriations  in,  45;  system 
of  transfers  between  appropri- 
ation heads  adopted  by,  50. 

Organization  units,  classification 
of,  1 1 ;  no  standard  system 
officially  adopted  at  present, 

56. 

Organ  of  General  Administra- 
tion, function  of,  35;  illustrat- 
ed by  California  State  Board  of 
Control,  Illinois  Department  of 
Finance,  Wisconsin  State 
Board  of  Public  Affairs,  37; 
need  for,  under  direction  of 
Chief  Executive,  33,  64-65, 
162. 

Panama  Canal,  segregation  of 
financial  operations  of,  5;  sys- 
tem of  transfer  of  appropria- 
tions provided  in  construction 
of,  53;  should  be  subsidiary 
corporation,  78. 

Patent  examiners,  85^. 

Patent  Office  should  be  subsid- 
iary corporation,  79. 

Philippines,  principle  of  subsid- 
iary service  corporation  adopt- 
ed by  Congress  for,  91. 

Porto  Rico,  system  of  transfers 
between  appropriation  heads 
adopted  by,  50^;  principle  of 


2l8 


INDEX 


subsidiary      service      corpora- 
tion adopted  by  Congress  for, 

91. 

Postal  Service  should  be  subsid- 
iary corporation,  78. 

President,  the  head  of  adminis- 
tration, 63;  budget  should  be 
prepared  by,  65 ;  power  of,  70 ; 
constitutional  right  to  prepare 
budget  not  insisted  upon  by, 
133;  constitutional  duty  im- 
posed upon,  133^;  intervenes 
in  the  matter  of  the  formula- 
tion of  the  estimates,  137. 

President's  Commission  on  Econ- 
omy and  Efficiency.  See,  Com- 
mission on  Economy  and  Effi- 
ciency. 

Public  domain,  services  relating 
to,  should  be  subsidiary  cor- 
porations, 79. 

Public  funds,  waste  of,  in  United 
States  and  France,  40. 

Reclamation  Service  should  be 
subsidiary  corporation,  79. 

Reports,  administrative,  should 
accompany  budget,  8;  not  used 
as  supporting  documents  to  es- 
timates in  United  States  gov- 
ernment, 57. 

Republican  Party,  plank  intro- 
duced in  platform  of,  demand- 
ing the  introduction  of  budget 
system,  155. 

Revenue  and  expenditure  data, 
tables  of,  should  accompany 
budget,  8;  no  proper  tables  in 
use,  56. 

Revenue  and  expenditures,  duty 
imposed  upon  President  by  act 
of  March  4,  1909,  regarding, 

136. 


Secretary  of  Treasury,  duties  of, 
in  present  budgetary  practice 
of  United  States,  55. 
Sherley,  Hon.  Swagar,  extract 
from  speech  of,  urging 
adoption  of  budget  system, 
149. 

Shipping  Board,  should  be  sub- 
sidiary corporation,  78;  powers 
of  subsidiary  legislation  con- 
ferred upon,  94. 

Special  careers  for  government 
employees  in  service  corpora- 
tions, 85. 

State   budgetary    systems,    adop- 
tion   of,    43n;    distinction    be- 
tween budget  and  budget  bill 
recognized,  45n. 
Stourm,    Rene,    definition    of    a 

budget,  2n. 

Subsidiary  service  corporations, 
personnel  of,  76;  services  of 
United  States  government 
which  should  be,  78;  duties  of, 
80-82;  effect  of  establishment 
of,  on  services  themselves,  84- 
87;  work  of  board  of  directors 
of,  87;  independent  accounting 
and  reporting  system  should  be 
installed  in,  88 ;  principle  as  ap- 
plicable to  functional  as  to  ter- 
ritorial services,  93,  94 ;  already 
applied  to  certain  functional 
services,  94;  adopted  by  the 
states  in  administration  of 
functional  services,  93«. 
Supervising  Architect  of  the 
Treasury,  office  of,  should  be 
subsidiary  corporation,  79. 
Supplies  and  manufactures  of 
government,  services  relating 
to,  should  be  subsidiary  corpo- 
rations, 79. 


219 


INDEX 


Taft,  William  H.,  President's 
Commission  on  Economy  and 
Efficiency  appointed  by,  18. 

Tennessee,  system  of  transfers 
between  appropriation  heads 
adopted  by,  5on. 

Territorial  services  and  depend- 
encies of  the  government 
erected  into  subsidiary  service 
corporations  by  Congress,  91. 

Transfer  of  property  and  serv- 
ices, relations  between  service 
corporations  and  government 
services  in  respect  to,  89. 

United  States  Employees'  Com- 
pensation Commission,  powers 
of  subsidiary  legislation  con- 
ferred upon,  94. 

United  States  Treasury,  allot- 
ment accounts  desirable  in,  51. 


Utah,     adoption     of     executive 
budget  in,  43». 

"Virement"  in  British  budgetary 

practice,  49. 
"Votes"     in     British    budgetary 

practice,  49. 

Warwick,    W.    W.,    member    of 

Commission  on   Economy  and 

Efficiency,  I44«. 
Willoughby,   W.   R,  member  of 

Commission  on  Economy  and 

Efficiency,  I44w. 
Wilson,  President,  letter  written 

by,  to  Hon.  Benjamin  R.  Till- 

man   advocating   the   adoption 

of  budget  system,  156. 
Wisconsin  State  Board  of  Public 

Affairs,   an  organ  of   general 

administration,  37. 


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